Budget 2019-20: The single premium policies typically have the option to choose 5 times or ten times of life cover i.e. sum assured.Union Budget 2019 India: Budget 2019 has proposed to raise the tax at source (TDS) limit in the case of life insurance policies from 1 to 5 per cent of the amount to be paid by the insurance companies. Under Section 194DA of the Income Tax Act, 1961, any amount received by the life insurance policyholder from an insurer is subject to TDS of 1 per cent, if the maturity proceeds is not exempted under Section 10(10D). If in the life insurance policies the sum assured is less than 10 times the premium amount, the policy proceeds are not tax-free under Section 10(10D).
Such a situation where the sum assured is less than ten times of premium is generally in the case of single premium insurance policies. The single premium policies typically have the option to choose 5 times or ten times of life cover i.e. sum assured.
It was seen that deducting tax on gross amount created difficulties to an assessee who otherwise has to pay tax on net income i.e after deducting the amount of insurance premium paid by him from the total sum received from the insurer.
Budget 2019 proposes that it is preferable to deduct tax on net income so that the income as per TDS return of the deductor can be matched automatically with the return of income filed by the assessee.
[“source=financialexpress”]