Query 1]

Recently, Income Tax department has introduced a new section 194DA (TDS on insurance policy payments). Can you please elaborate upon the scope of section 194DA? Please inform me regarding the code which is to be mentioned in Income tax challan in ITNS-281 for TDS done under Section 194 DA? [Sunil K Bharambe, D-136 / I, Devendra Nagar,]


Earlier, under section 10(10D), any sum received from life insurer was not taxable if the premium paid does not exceed 10% of the sum assured. Taxpayer were made liable to income tax only if he has paid premium of more than 10% of the sum assured in any financial year.

By virtue of Finance Act-2014, a new section 194DA has been inserte requiring payer to deduct tax at source @ 2% on the proceeds of life insurance policy (for both unit-link insurance plans and traditional plans), if the premium paid by taxpayer exceeds 10% of the sum assured in any financial year. The deduction is to be done on the entire amount including any sum allocate by the way of bonus. However, only the policies maturing on or after October 1, 2014 will come under the purview of this amendment.

Also, TDS will not be attract if the maturity amount is less than Rs. 1 lakh. Sum received on the death of the insured is still not taxable. The code for TDS payment u/s 194DA has not yet been specified in ITNS-281 challan form and so making the payment u/s 194DA would not be possible as of now. However, it may be note that by virtue of CPC communication date 10.09.2014, the CPC (TDS) system gives credit of TDS against different sections of the Act even though a specific section has been quote  in the challan. Effectively, you can make the TDS payment under any other code and can adjust the same against the TDS U/s 194DA while filing the quarterly TDS return.

Query 2]

I am not able to recall but I have read earlier that preventive health check up is also eligible for income tax benefit apart from mediclaim policy payment. Please advice if it is so? Regarding mediclaim deduction from income, please guide whether the deduction is not available if the payment is done in cash? What are the precautions while making mediclaim payment and also about the amount eligible for deduction? []


  1. Section 80D offers deduction to Individual / HUF taxpayer towards the following payment:
    a] Payment of health insurance premium of assessee or his family or his parents
    b] Contribution to the Central Government Health Scheme (CGHS).
    c] Payment for preventive health check-up of the assessee or his family or his parents.
    Amount of Deduction:
    Deduction can be claimed by an individual in respect of the medical insurance premium paid up to Rs 15,000/- for himself, spouse and dependent children. Additionally, he can also claim deduction for the medical insurance premium up to Rs 15,000 for his parent(s). The aforesaid deductions shall be Rs 20,000/- in case the premium is pay for senior citizen (60 years or more).
    i] Ensure to make the payment of premium by cheque only. However, payment for preventive health care can be make in cash.
    ii] There is a max ceiling of Rs. 5,000/- on preventive health check up within the overall cap as mentioned above.
  2. There are many taxpayers who are not aware of tax sops available towards preventive health check up. It may be note that an individual assessee can claim deduction towards payment on account of preventive health check up of himself, spouse, dependent children or parents. The total deduction towards preventive health check up cannot exceeds Rs. 5,000/-. The said deduction is admissible u/s 80D of the Income Tax Act-1961 & is subject to overall cap of Rs. 15,000/- or Rs. 20,000/-as discussed above.


Query 3]

I am thankful to you for providing clarifications to my queries under Tax Talk published on 04.08.2014. However, I further seek following clarifications on Long Term Capital Gain (LTCG) taxability:

  1. Even if there is no liability to LTCG Tax as a result of investment in the house property and exemption thereof u/s 54, still whether I am require to file details of LTCG liability in the return of FY 14-15?
  2. To claim an exemption against construction of house property, it is advise to maintain proper records of construction.  Please clarify as to how to maintain records for payments made to laborers (masons, carpenters, painters etc) as they don’t issue even cash receipts?  Similarly in construction sector, tax invoices are not issue for many items like bricks, sand, wood, cement, iron etc. Please indicate the format through which proper documentation can be maintaine?
  3. I intend to utilize the fund within the same financial year in which I have earned LTCG. Whether I can take short term interest benefit of LTCG amount until it is fully utilize for construction without paying tax, if any? [Vinit]


  1. Even if no part of LTCG is taxable as a result of exemption, still the same is required to be disclosed & necessary details has to be filled in the IT return..
  2. You may prepare the self generated voucher incorporating the details of the payment with quantity, nature of payment, mode of payment, name and address of the receiver duly signed by the receiver in support of your investment in the house property.
  3. In the intervening period (but not stretched beyond the due date of filing income tax return), you can deposit the amount of LTCG for any purpose whatsoever.


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