Budget 2015: Not in the tax bracket? You can avoid TDS on life insurance proceeds

MUMBAI: Individuals who are out of the income tax net and are entitled to receive more than Rs 1 lakh as maturity proceeds under certain life policies have been granted some relief by Finance Minister Arun Jaitley.

"A provision to deduct tax at source at 2% from proceeds of life insurance policies that are not exempt under section 10(10D) was introduced in the finance bill last year," said Vaibhav Sankla, director, H&R Block, a tax consulting firm. This is applicable to policies where the annual premium exceeds 10% of the sum assured.

Now, Union Budget 2015-16 has amended this rule to exempt policyholders who do not have have a taxable income from paying TDS on such policies. "They need to submit Form 15G/15H for non-deduction of tax at source to the life insurer," said Sankla.

The amendment will come into force from June 1, 2015.