TDS on Life insurance maturity proceeds (taxable policies) — Section 194DA (now 393)
Rate
| Type of payment | Rate (with PAN) | Notes |
|---|---|---|
| any | 2% | Reduced from 5% effective 2026-04-01; on income component |
No valid PAN: 20% or the normal rate, whichever is higher (Section 397(2), old 206AA).
Threshold
TDS applies when: ₹1,00,000 aggregate in the year. Once a threshold is crossed, TDS applies on the full amount, not just the excess.
Worked example
Paying ₹1,20,000 (plus GST) to life insurance maturity proceeds on 10 June 2026:
Exemptions & relief
- Exempt policies u/s 10(10D) — no TDS
If you get it wrong
Late deduction: 1% per month or part thereof, from date deductible to date deducted.
Late deposit: 1.5% per month or part thereof, from date deducted to date deposited.
Late return: Rs 200/day (234E equivalent), capped at TDS amount in the statement.
Non-deduction: 30% of expenditure disallowed for non-deduction/non-deposit (40(a)(ia) equivalent); wrong payment code can trigger the same — verify scope under 2025 Act.
FAQs
What is the new section number for 194DA from FY 2026-27?
Under the Income Tax Act 2025, 194DA now falls under Section 393. The payment/return code is 1030.
What is the TDS rate under section 194DA?
2%. If the payee has no valid PAN, 20% applies (or the normal rate, whichever is higher).
What is the threshold for 194DA?
₹1,00,000 aggregate in the year.
Which TDS return is 194DA reported in?
Form 140 (was 26Q), filed quarterly.
Written and reviewed by a CA firm. Verified 2026-06-08 against the Income Tax Act 2025 / Finance Act 2025. General information, not advice for your specific case.