Insurance regulator IRDAI will approach the government to seek relaxation on the 2% income tax deducted at source (TDS) by insurance companies from maturity proceeds of life insurance policies.
Under Section 10 (10D) of the Income Tax Act, from October 2014, insurers have started deducting 2% TDS on maturity proceeds of life insurance policies if the premium paid is more than 10% of the sum assured. Further, if policyholders don’t provide PAN card to insurers, it attracts a TDS of 20%.
“We will take up the matter with the government. Out of various Gross Domestic Savings (GDS) which consists of financial instruments including mutual funds, only insurance is taxed on maturity,” said Nilesh Sathe, Member-Life, IRDAI.
He was speaking to reporters on the sidelines of CII Distribution Summit held in Mumbai.
He pointed out that the insurance sector is instrumental in providing support to government’s development activities, particularly in building infrastructure. “More than 50% of the premium amount collected by insurance companies goes to government securities,” said Sathe.
Sathe said there is no justification for charging TDS on maturity proceeds only in life insurance policies and IRDAI will seek parity with other financial products.