CHENNAI:  In a quiet move, the impact of which is being felt only now, the statute books have been amended to deduct tax at source on some insurance payouts, which could particularly affect people above 45 and those with single-premium policies.

This, by way of a new section -- 194DA -- in the Income Tax Act, 1961, that took effect Oct 1, and surprised many policy-holders who got to know of it after they received a communique from their insurance companies. Many more are still unaware.

"Section 194D envisages deduction of tax at source on the life insurance policy payouts which are not exempt under Section 10(10D)," Vibha Padalkar, executive director and chief financial officer of HDFC Standard Life Insurance, told IANS.

Under this section, life insurance companies have to deduct a two-percent tax at source on aggregate payouts exceeding 100,000 during a financial year under life policies. In case where PAN card details are not available, the deduction shall be 20 percent.

For the record, Section 10(10D) of the Income Tax Act exempts any sum received under an insurance policy that is paid from April 1, 2012, if the premium for any of the years during the currency of the policy is within 10 percent of the actual sum assured.