Budget 2024 reduces TDS on life insurance policy payout from 5% to 2%, Now get a higher payout on these case

July 23, 2024

Synopsis
In the Budget 2024 proposal, it has been announced that the payout from your life insurance policy will be higher due to a reduction in the TDS (Tax Deducted at Source) rate to 2%. The explanatory memorandum of Budget 2024 states, "It is proposed that TDS under section 194DA of the Act be reduced from 5% to 2%".

As per budget 2024 proposal you will now get a higher amount of payout from your life insurance policy as TDS rate has been reduced to 2%. “It is proposed that TDS under section 194DA of the Act be reduced from 5% to 2%” says explanatory memorandum of budget 2024.

This is the TDS which is deducted by the life insurance company while making the payment to the policyholder. “Section 194DA - Payment in respect of life insurance policy As per provisions of section 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 5% on the amount of income comprised therein,” says the budget 2024 memorandum.

The amendment will take effect from 1st day of October 2024.

"TDS reduction to 2% for payment of bonus or proceeds made on life insurance policies upon maturity will also ensure higher receivables for individual policyholders," says Parimal Heda, Chief Investment Officer, Go Digit General Insurance.

[The Economic Times]