Mechanism: The insurer deducts tax on the income component of a non-exempt life-insurance payment to a resident where the annual aggregate reaches the threshold.
Litigation profile: Sparse. The live questions are about section 10(10D) exemption, not the deduction — the candour rule applies.
A. SECTION COMMENTARY
Section 194DA requires any person responsible for paying a resident any sum under a life insurance policy (including bonus), which is not exempt under section 10(10D), to deduct tax at the prescribed rate where the aggregate payment in a financial year reaches the threshold. The section is the collection mechanism for the taxable component of life-insurance proceeds — typically arising where the premium exceeded the statutory percentage of the sum assured, or under the recent caps on high-premium policies, so that section 10(10D) exemption is lost.
Deduction is on the 'income' component
The deduction is computed on the income comprised in the payment, not on the gross maturity sum — the statute confines TDS to the taxable portion (broadly, the excess of the sum received over the aggregate premiums paid), so the mechanism tracks the charge rather than the gross receipt. The interaction with section 10(10D) is therefore central: if the proceeds are exempt, section 194DA does not apply at all.
Why authority is sparse
The section is recent and mechanical and is rarely contested on its own terms; the live questions are about the scope of the section 10(10D) exemption (decided in the policyholder's assessment), not about the deduction. In candour, there is no developed body of section 194DA merits authority.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194DA. Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, other than the amount not includible in the total income under clause (10D) of section 10, shall, at the time of payment thereof, deduct income-tax thereon at the rate of two per cent on the amount of income comprised therein :
Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than one hundred thousand rupees.
C. AUTHORITIES
Candour rule observed: section 194DA is a recent, narrow provision; the live questions are upstream (section 10(10D)). Only cognate points are offered.
Principle: Section 194DA operates only where the life-insurance payment is not exempt under section 10(10D); whether the exemption applies (premium-to-sum-assured ratio; the high-premium caps) is the decisive upstream question and is determined in the recipient's assessment.
Use: Locates the charge that section 194DA collects against.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194DA.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194DA — Payment Under a Life Insurance Policy (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Recent, mechanical; substantially unlitigated.
Finance Act, 2026: No amendment.
Mechanism: The insurer deducts tax on the income component of a non-exempt life-insurance payment to a resident where the annual aggregate reaches the threshold.
Litigation profile: Sparse. The live questions are about section 10(10D) exemption, not the deduction — the candour rule applies.
A. SECTION COMMENTARY
Section 194DA requires any person responsible for paying a resident any sum under a life insurance policy (including bonus), which is not exempt under section 10(10D), to deduct tax at the prescribed rate where the aggregate payment in a financial year reaches the threshold. The section is the collection mechanism for the taxable component of life-insurance proceeds — typically arising where the premium exceeded the statutory percentage of the sum assured, or under the recent caps on high-premium policies, so that section 10(10D) exemption is lost.
Deduction is on the 'income' component
The deduction is computed on the income comprised in the payment, not on the gross maturity sum — the statute confines TDS to the taxable portion (broadly, the excess of the sum received over the aggregate premiums paid), so the mechanism tracks the charge rather than the gross receipt. The interaction with section 10(10D) is therefore central: if the proceeds are exempt, section 194DA does not apply at all.
Why authority is sparse
The section is recent and mechanical and is rarely contested on its own terms; the live questions are about the scope of the section 10(10D) exemption (decided in the policyholder's assessment), not about the deduction. In candour, there is no developed body of section 194DA merits authority.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194DA. Any person responsible for paying to a resident any sum under a life insurance policy, including the sum allocated by way of bonus on such policy, other than the amount not includible in the total income under clause (10D) of section 10, shall, at the time of payment thereof, deduct income-tax thereon at the rate of two per cent on the amount of income comprised therein :
Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payments to the payee during the financial year is less than one hundred thousand rupees.
C. AUTHORITIES
Candour rule observed: section 194DA is a recent, narrow provision; the live questions are upstream (section 10(10D)). Only cognate points are offered.
Cognate principles
Interaction with section 10(10D)
Principle: Section 194DA operates only where the life-insurance payment is not exempt under section 10(10D); whether the exemption applies (premium-to-sum-assured ratio; the high-premium caps) is the decisive upstream question and is determined in the recipient's assessment.
Use: Locates the charge that section 194DA collects against.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194DA.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.