Budget 2024-25: Now Get Higher Return from Life Insurance Policy

The reduction in TDS from 5% to 2% has given new hope and happiness to the people who have Life Insurance policies because now they will get a higher return on their investment. Under section 194DA, TDS is reduced from 5% to 2% in Budget 2024-25 for Life Insurance Policy.

TDS Under Section 194DA

Under this section, the tax deduction is done for the amount which is given to the policyholder at the time of payout. This deduction is done if the payout amount is more than Rs.1 lakh. Previously it was 5% but from October 1, 2024, it will be 2% according to the new updates during Budget 2024-25.

TDS Under Section 194D

Under this section, the broker or agent who sells the policy to the customer receives a commission or incentives after payment is done by the customer for the policy. During the payment of the commission if the amount exceeds Rs. 15,000 then a 5% tax is applied, now this will be 2% from April 1, 2025.

For Insurer

If the policy purchased by you is through the agent or broker then the commission or any incentives for that policy are credited to the agent or broker account and come under TDS section 194D of the Income Tax Act. Now from April 1, 2025, these TDS deductions of commission will be reduced from 5% to 2%, which means the tax deduction on the commission paid to the agent and brokers will be reduced.

Benefits of Lower TDS

Reduction in the TDS rate is beneficial for the person having a Life Insurance policy because now he will get a higher return from his investment. An individual having an Annuity plan will get a good return in future because it gives a regular income in future for which an individual has to make a payment as a premium on a monthly basis or can invest a lump sum amount. 

This will lead to an increase in investment in insurance products like annuity plans, retirement plans, pension plans and life insurance plans which will boost the insurance sector market.

Now brokers and agents have gotten relief from tax deductions on their commission and they will earn more.