The Budget proposal to change the tax deduction at source (TDS) on some life insurance policies has confused tax experts. Unless the Central Board of Direct Taxation provides clarity, tax experts feel that the new proposal can lead to assessing officers interpreting the regulations in a way that suit them, causing problems to the taxpayer.
According to the existing regulations, when an insurer is making a pay-out on life insurance policies where the annual premium exceeds 10 per cent of the sum assured, it needs to deduct tax at the rate of 1 per cent on the total pay-out. The