Income Tax Act Section 194 DA

  1. What Is Section 194DA of the Income Tax Act?

Section 194DA of the Income Tax Act gives instructions for calculating, exempting, and collecting TDS on insurance commissions and premium payments. As defined in the section, Any individual or firm that gives a resident any sum as a life insurance policy, bonus, or additional amount not stated as income as per Section 10 of the Income Tax Act shall have a tax deduction of 2%.’ In basic terms, any individual or company that pays any cash to a resident of this country for insurance revenue must deduct and deposit 2% of the payout amount with the government. 

A resident for income tax purposes is someone who has lived within India’s sovereign borders for more than 180 days, regardless of nationality or citizenship. The taxpayer, also known as the “deductee,” will receive a certificate known as “Form 16” with the specifics of the deduction from the source of income, also known as the “deductor,” after subtracting the TDS payment amount. When determining the total income tax owed at the end of the year, the deductee can set off against the tax liability. 

It should be noted that deductions under Section 194DA will not be made if their total for the year falls below INR 1000. Furthermore, any sum of money received as a result of the death of a senior by a legal heir is exempt from deductions under Section 194DA of the Income Tax Act.


2. Section 194DA Eligibility for Insurance Commission TDS

There is no deduction under Section 194DA of the Income Tax Act in the following circumstances:

  • The insurance commission credit is limited to INR 15,000.
  • Individuals may submit Form 15G/15H to demonstrate that they owe no taxes on their total income.
  • If a person applies using Form No. 13, they might request a lower tax rate or even tax exemption. Following approval, the individual must get a Certificate of Acceptance from the Assessment Officer. Furthermore, this option is only available to applicants who have provided their PAN on the application.
  • TDS will not be excused if the insurance premium is larger than 10%, 15%, or 20%, depending on the circumstances. 
  • Money received under Sections 80DD(3) and 80DDA(3) shall not be deductible.
  • The deduction applies to any money received as part of the Keyman insurance coverage.
  • Deductions will apply to any money received after April 1, 2003 or 2012 if the premium payable exceeds 10% of the capital guaranteed.


In conclusion, Section 194DA of the Income Tax Act deals with TDS (Tax Deducted at Source) on payments received under life insurance contracts that do not qualify for tax exemption. According to this provision, if the amount received under a life insurance policy exceeds Rs. 1 lakh, a TDS rate of 1% is applied. This rule is intended to assure tax conformity and to make the collection of tax on life insurance payouts easier. To meet their tax duties and avoid penalties for noncompliance, policyholders and insurers must comprehend and comply with Section 194DA rules.