Save Rs 499 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

Sec.10 (10D) Tax Benefit not available to PaidUp policy ? ZPaid

TDS / TCS 365 views 1 replies

PREM GUPTA

7 Points Posted on 30 December 2025

_Hi,

_{In an ULIP policy taken in 2016 with a premium of 5 Lakh pa. and insured cover of 50 Lakhs.(i.e.= or Less than 10%)}

_{After paying premium for more than 6 yrs it is converted to Paid up.}

_{Now the Insurance Co.is claiming that Insured cover after conversion of policy to Paid-Up Benefit of Sec 10 (10D) are not applicable and TDS will be Deducted on the Maturity Paid-Up value, whether encashed before Maturity or on the Maturity as the Sec. is Void due to Insurance Co. Reducing the Insurance Cover on conversion of policy to Paid-Up ? ?}

Replies (1)

Ryan Vaz

VR4U

153 Points Posted on 31 December 2025

The insurer’s position is not legally sustainable in general.
If, at the time of issue in 2016, the ULIP satisfied the ≤10% premium vs. sum assured condition, then Section 10(10D) exemption continues even if the policy is later made paid-up with a proportionately reduced sum assured, provided such reduction is as per policy terms.
Accordingly, Section 194DA TDS should NOT be deducted on maturity or surrender proceeds.

Action Plan

Obtain original policy document and paid-up endorsement from insurer.
Check and highlight original sum assured and premium clause.
Submit a written objection to insurer citing Section 10(10D) + CBDT Circulars.
If TDS already deducted, claim refund in ITR under “Exempt income – 10(10D)”.
If insurer persists, escalate to IRDAI grievance cell