The Central Board of Direct Taxes (CBDT) vide Circular No. 15/2023 dated 16.08.2023 issued guidelines on the applicability of tax exemption on any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy under section 10(10D) of the Income-tax Act, 1961 (the ‘Act’).
These guidelines were issued after the Finance Act, 2023 removed the tax exemption on any sum received from life insurance policies for which the aggregate annual premium is more than Rs 5 Lakh and has rationalized the exempt income under life insurance policies.
Section 10(10D) of the Act provides for income-tax exemption on the sum received under a life insurance policy, including bonus on such policy. There is a condition that the premium payable for any of the years during the terms of the policy should not exceed ten per cent of the actual capital sum assured.
It may be pertinent to note that the legislative intent of providing exemption under section 10(10D) of the Act has been to further the welfare objective by subsidising the risk premium for an individual’s life and providing benefit to small and genuine cases of life insurance coverage. However, over the years it has been observed that several high net-worth individuals are misusing the exemption provided under clause (10D) of section 10 of the Act by investing in policies having large premium contributions (as it is acting as an investment policy) and claiming exemption on the sum received under such life insurance policies.
In order to prevent the misuse of exemption under the said clause, Finance Act, 2021, amended clause (10D) of section 10 of the Act to, inter-alia, provide that the sum received under a ULIP (barring the sum received on death of a person), issued on or after the 01.02.2021 shall not be exempt if the amount of premium payable for any of the previous years during the term of such policy exceeds Rs 2,50,000. It was also provided that if premium is payable for more than one ULIPs, issued on or after the 01.02.2021, the exemption under the said clause shall be available only with respect to such policies where the aggregate premium does not exceed Rs 2,50,000 for any of the previous years during the term of any of the policy. Circular No. 02 of 2022 dated 19.01.2022 was issued to explain how the exemption is to be calculated when there are more than one policies.
After the enactment of the above amendment, while ULIPs having premium payable exceeding Rs 2, 50,000/- have been excluded from the purview of clause (10D) of section 10 of the Act, all other kinds of life insurance policies are still eligible for exemption irrespective of the amount of premium payable.
Finance Act, 2023 has made amendments in section 10(10D) of the Act w.e.f 1st April, 2024 (AY 2024-25) to curb such misuse and provide for conditional exemption to sum received under a life insurance policy.
Income from insurance policies (other than ULIP for which provisions already exists) having premium or aggregate of premium above Rs 5,00,000 in a year shall not be exempt from tax and be taxable. However, Income will be exempt if received on the death of the insured person.
Further, this income from a life insurance policy shall be taxable under the head “income from other sources”. Deduction shall be allowed for premium paid, if such premium has not been claimed as deduction earlier. These provisions shall apply for policies issued on or after 1st April, 2023. There will not be any change in taxation for polices issued before this date.
The following amendments are made in the Act related to taxation of proceeds received from life insurance policies-
(i) A new sixth proviso to clause (10D) of the section 10 of the Act is inserted to provide that no exemption shall be applicable to any sum received under any life insurance policy, other than a Unit Linked Insurance Policy (ULIP), issued on or after 01-04-2023 if the amount of premium payable for any of the previous year during the term of such policy exceeds Rs. 5,00,000.
(ii) A new seventh proviso to clause (10D) of section 10 of the Act is inserted to provide that if the premium is payable by a person for more than one life insurance policy (other than unit linked insurance policy), issued on or after the 1st April, 2023, then tax exemption shall be applicable only with respect to those life insurance policies (other than unit linked insurance policies), where the aggregate amount of premium does not exceed Rs. 5,00,000 in any of the previous years during the term of any of those policies.
(iii) A new eighth proviso is inserted to clause (10D) of section 10 of the Act to provide that any sum received from a life insurance policy on the death of a person shall remain exempt from tax.
(iv) Further, section 56(2) of the Act is amended, and a new clause (xiii) is inserted to provide that any sum (including bonus) received under a life insurance policy in a previous year, which is not exempt under section 10(10D) of the Act shall be chargeable to income-tax under the head “Income from other sources”. While computing the income from the said insurance policy, the aggregate of the premium paid during the term of such life insurance policy shall be deductible from the sum so received provided the premium paid was never claimed as deduction under any other provision of the Act.
This would not apply to ULIP or Keyman insurance policies whose taxation is governed by other existing provisions of the Act
(v) Consequential amendment is made in the definition section 2 of the Act and a new sub-clause (xviid) is inserted in clause (24) to provide that income shall include any sum referred to in clause (xiii) of sub-section (2) of section 56 of the Act. In other words, the excess of sum received under a life insurance policy over the aggregate amount of premium paid shall be treated as ‘income’.
(vi) The ninth proviso empowers the Board to issue guidelines for the purpose of removal of difficulties in giving effect to the provisions of this clause.
In order to remove the difficulty and to clarify the amendments, the Board has issued this circular to provide guidelines on the taxability of any sum received under a life insurance policy in different situations.
Read the full text of CBDT Circular No. 15/2023 dated 16.08.2023 on Tax Exemption on Life Insurance Policies section 10(10D)
Circular No. 15 of 2023
F. No.370142/28/2023-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
***********
Dated the 16th August, 2023
Sub: Guidelines under clause (10D) of section 10 of the Income-tax Act, 1961 – reg.
Clause (10D) of section 10 of the Income-tax Act, 1961 (the Act) provides for income-tax exemption on any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy subject to certain exclusions.
2. The Finance Act, 2023 (Finance Act), inter-alia,-
I. amended clause (10D) of section 10 of the Act by substituting the existing sixth proviso with the new sixth, seventh and eighth provisos to, inter-alia, provide that:
(i) with effect from assessment year 2024-25, the sum received under a life insurance policy, other than a unit linked insurance policy, issued on or after the 1st day of April, 2023, shall not be exempt under the said clause if the amount of premium payable for any of the previous years during the term of such policy exceeds Rs 5,00,000 [sixth proviso];
(ii) if premium is payable for more than one life insurance policy, other than a unit linked insurance policy, issued on or after 01.04.2023, the exemption under the said clause shall be available only with respect to such policies where the aggregate premium does not exceed Rs 5,00,000 for any of the previous years during the term of any of those policies [seventh proviso];
(iii) the sixth and seventh provisos shall not apply in case of any sum received on the death of a person [eighth proviso]
II. inserted a new clause (xiil) in sub-section (2) of section 56 to provide that where any sum is received, including the amount allocated by way of bonus, at any time during a previous year, under a life insurance policy, other than the sum,-
a. received under a unit linked insurance policy, or
b. being the income referred to in clause (iv) of sub-section 2,
which is not to be excluded from the total income of the previous year in accordance with the provisions of clause (10D) of section 10, the sum so received as exceeds the aggregate of the premium paid, during the term of such life insurance policy, and not claimed as deduction in any other provision of the Act, computed in the manner as may be prescribed shall be chargeable to income-tax under the head “Income from other sources”;
III. inserted a sub-clause (xviid) in clause (24) of section 2 to provide that income shall include any sum referred to in clause (xiii) of sub-section (2) of section 56.
2.1. It may be noted that Finance Act, 2021 had earlier inserted, fourth to seventh provisos in clause (10D) of section 10 to provide that the sum received under any unit linked insurance policy [ULIP] (except any such sum received on the death of a person), issued on or after the 01.02.2021 shall not be exempt under said clause, if the amount of premium payable for any of the previous years during the term of such policy exceeds Rs 2,50,000 (fourth proviso). It was also provided that if the premium is payable for more than one ULIPs, issued on or after the 01.02.2021, the exemption under the said clause shall be available only with respect to such policies where the aggregate premium does not exceed Rs 2,50,000 for any of the previous years during the term of any of the policies (fifth proviso).
Issuance of Guidelines for removal of difficulties
3. Ninth proviso to clause (10D) of section 10 of the Act also empowers the Central Board of Direct Taxes (Board) to issue guidelines, with the previous approval of the Central Government, in order to remove any difficulty which arises while giving effect to the provisions of the said clause. In exercise of the powers under this proviso, Board, with the previous approval of the Central Government, hereby issues the following guidelines.
Guidelines
4. In these guidelines:-
(i) “eligible life insurance policy” means any life insurance policy (other than unit linked insurance policy) issued on or after 01.04.2023;
(ii) “consideration” means sum received (of any nature including bonus) under an eligible life insurance policy
(iii)“current previous year” means the previous year in which consideration is received and its taxability is being examined.
4.1. Consideration received during the previous year under an eligible life insurance policy shall be exempt or not exempt under clause (10D) of section 10 of the Act, subject to the satisfaction of other provisions of said clause. The same are explained by way of examples of different situations:-
4.2 Situation 1: No consideration is received by the assessee on any eligible life insurance policies during any previous year preceding the current previous year or consideration has been received on such eligible life insurance policies but has not been claimed exempt. The exemption under clause (10D) of section 10 of the Act shall be determined as under:
i. If the assessee has received consideration, during the current previous year, under one eligible life insurance policy only and the amount of premium payable on such eligible life insurance policy does not exceed Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policy, such consideration shall be eligible for exemption under the said clause (10D) subject to fulfilment of other conditions;
ii. If the assessee has received consideration, during the current previous year, under one eligible life insurance policy only and the amount of premium payable on such eligible life insurance policy exceeds Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policy, such consideration shall not be eligible for exemption under the said clause (10D);
iii. If the assessee has received consideration, during the current previous year, under more than one eligible life insurance policies and the aggregate of the amount of premium payable on such eligible life insurance policies does not exceed Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policies, such consideration shall be eligible for exemption under the said clause (10D) subject to fulfilment of other conditions;
iv. If the assessee has received consideration, during the current previous year, under more than one eligible life insurance policies and the aggregate of the amount of premium payable on such eligible life insurance policies exceeds Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policies, the consideration under only such eligible life insurance policies shall be eligible for exemption under the said clause (10D) where aggregate of the amount of the premium payable does not exceed Rs 5,00,000 for any of the previous years during their term (Refer Examples) subject to fulfilment of other conditions.
4.3 Situation 2: Consideration has been received by the assessee under any one or more eligible life insurance policies during any previous year preceding the current previous year and it has been claimed exempt under clause (10D) of section 10 of the Act. Such eligible life insurance policies are referred as “old eligible life insurance policies” in this paragraph and corresponding examples and reference to eligible life insurance policies in this paragraph and corresponding examples shall not include old eligible life insurance policies. The exemption under clause (10D) of section 10 of the Act shall be determined as under:
i. If the assessee has received consideration, during the current previous year, under one eligible life insurance policy only and aggregate amount of premium payable on such eligible life insurance policy and old eligible life insurance policies does not exceed Rs 5,00,000 for any of the previous year during the term of such eligible life insurance policy, the consideration under such eligible life insurance policy shall be eligible for exemption under the said clause (10D) provided it is not excluded under sub-clauses (a) to (d) of said clause (10D);
ii. If the assessee has received consideration, during the current previous year, under one eligible life insurance policy only and aggregate amount of premium payable on such eligible life insurance policy and old eligible life insurance policies exceeds Rs. 5,00,000 for any of the previous year during the term of such eligible life insurance policy, the consideration under such eligible life insurance policy shall not be eligible for exemption under the said clause (10D);
iii. If the assessee has received consideration, during the current previous year, under more than one eligible life insurance policies and aggregate of the amount of premium payable on such eligible life insurance policies and old eligible life insurance policies does not exceeds Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policies, such consideration shall be eligible for exemption under the said clause (10D) provided it is not excluded under sub-clauses (a) to (d) of said clause (10D);
iv. If the assessee has received consideration, during the current previous year, under more than one eligible life insurance policies and aggregate of the amount of premium payable on such eligible life insurance policies and old eligible life insurance policies exceeds Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policies, consideration under only such eligible life insurance policies shall be eligible for exemption under the said clause (10D) where aggregate amount of premium along with the aggregate amount of premium of old eligible life insurance policies does not exceed Rs 5,00,000 for any of the previous years during the term of any of such eligible life insurance policies (Refer examples) provided it is not excluded under sub-clauses (a) to (d) of said clause (10D).
4.4 The above guidelines are explained with the help of the following examples:
Example 1:
The assessee has the following policy which satisfies all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example).
Taxability as per sixth proviso to clause (10D) of section 10 of the Act:
The sum received on maturity will be exempt under clause (10D) of section 10 of the Act as the policy has been issued before 01.04.2023 and accordingly not covered by the 6th to 8th provisos to the said clause (10) of section 10 of the Act, as substituted by Finance Act, 2023.
Example 2:
The assessee has the following policy which satisfies all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assesse did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34.
Taxability as per sixth proviso to clause (10D) of section 10 of the Act:
The consideration received will not be exempt under clause (10D) of section 10 of the Act as per the provisions of sixth proviso since the annual premium payable on the policy exceeded Rs.5,00,000.
Example 3:
The assessee has the following policy which satisfies all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34.
Taxability as per sixth proviso to clause (10D) of section 10 of the Act:
The consideration received will be exempt under clause (10D) of section 10 of the Act as the provisions of sixth proviso will not apply since the annual premium payable on the policy does not exceed Rs 5,00,000 in any of the previous years during the term of the policy.
Example 4:
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof 1s being explained in the example).
The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34.
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
The consideration received under life insurance policy “B” will not be exempt under clause (10D) of section 10 of the Act as per the provisions of seventh proviso, since aggregate of the annual premium payable for life insurance policy “A” and life insurance policy “B” exceeds Rs.5,00,000 during the term of these policies. However, the consideration received under life insurance policy “A” shall be exempt under clause (10D) of section 10 of the Act since its annual premium does not exceed Rs 5,00,000 in any of the previous years during the term of the policy.
Example 5
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34.
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
● The consideration received under life insurance policy “C” will not be exempt under clause (10D) of section 10 of the Act as per the provisions of seventh proviso since aggregate of the annual premium payable for life insurance policy “A”, life insurance policy “B” and life insurance policy “C’ exceeds Rs 5,00,000 during the term of these policies.
● However, the consideration received under life insurance policies “A” and ‘‘B” shall be exempt under clause (10D) of section 10 of the Act, since aggregate of annual premium payable for these two policies does not exceed Rs 5,00,000 for any previous year during the term of these two policies.
Example 6:
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34.
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
● The consideration under life insurance policy “X” will be exempt under clause (10D) of section 10 of the Act as the policy has been issued before 01.04.2023 and it is not covered by recently introduced provisions.
● The consideration received under life insurance policy “C” will not be exempt under clause (10D) of section 10 of the Act as per the provisions of seventh proviso since ageregate of the annual premium payable for life insurance policy “A”, life insurance policy “B’ and life insurance policy “C” exceeds Rs 5,00,000 during the term of these policies.
● However, the consideration received under life insurance policy “A” and “B”’ shall be exempt under clause (10D) of section 10 of the Act, since aggregate of annual premium payable for these two policies does not exceed Rs 5,00,000 for any previous year during the term of these two policies.
Example 7:
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34.
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
● The consideration under life insurance policy “X” will be exempt for the previous year 2033-34 under clause (10D) of section 10 of the Act since the annual premium does not exceed Rs 5,00,000.
● The consideration received under life insurance policies “A”, “B” and “C” will not be exempt under clause (10D) of section 10 of the Act as per the provisions of seventh proviso since aggregate of the annual premium payable for these three life insurance policies and life insurance policy “X” exceeds Rs 5,00,000 for the previous year 2023-24 to 2033-34 which fall under the tenure of these policies. The consideration under life insurance policy “A” will also not be eligible for exemption under the said clause as the aggregate of annual premium of life insurance policies “X” and “A” exceeds Rs 5,00,000.
Example 8:
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2043-44.
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
The consideration under life insurance policies “X” and “A” will be exempt for the previous year 2043-44 and previous year 2048-49 respectively, under clause (10D) of section 10 of the Act since the aggregate of the annual premium payable for the life insurance policies “X” and “A” together did not exceed Rs 5,00,000 for any of the previous years during the term of life insurance policies “X” and “A”.
Example 9:
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34.
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
● The consideration under life insurance policy “X” will be exempt under clause (10D) of section 10 of the Act for the previous year 2033-34 since the annual premium does not exceed Rs 5,00,000.
● The consideration received under life insurance policy “B” only will be exempt under clause (10D) of section 10 of the Act during the previous year 2034-35 while consideration received under life insurance policies “A” and “C” will be taxable as per the provisions of seventh proviso.
● The exemption is restricted to consideration under life insurance policy “B” since aggregate of the annual premium payable for the life insurance policies “X” and “B” together did not exceed Rs 5,00,000 for any of the previous years during the term of life insurance policies “X” and “B”.
● Here instead of life insurance policy “B”, we could have taken life insurance policy “A” as the aggregate of annual premium payable for life insurance policies “X” and “A” is also less than Rs 5,00,000 during the term of these life insurance policies. However, since including life insurance policy “B” instead of life insurance policy “A” is more beneficial to the assessee, life insurance policy “B” has been considered for exemption.
Example 10:
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2033-34. (It needs to be specified that consideration under life insurance policy “X” has not been claimed exempt)
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
● The consideration under life insurance policy “X” was not claimed to be exempt under clause (10D) of section 10 of the Act by the assessee therefore it is not covered within the definition of old eligible life insurance policies.
● The consideration received under life insurance policies “B” and “C”’ will be exempt under clause (10D) of section 10 of the Act. However, since aggregate of the annual premium payable for the life insurance policies “B” and “C” together did not exceed Rs 5,00,000 for any of the previous years during the term of any of these life insurance policies “B” or “C™ and life insurance policy “X” was not claimed to be exempt under clause (10D) of section 10 of the Act, the consideration received under life insurance policy “A” will be taxable as per the provisions of seventh proviso to the said clause (10D) of section 10 of the Act. It may again be stated that life insurance policies “B” and “C”’ are considered for exemption instead of combination of policies “A” and “B” or policies “A” and “C” as this combination (i.e. life insurance policies “B” and “C’’) is more beneficial to the assessee.
Example 11:
The assessee has the following policies all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the sixth and seventh proviso of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policy in earlier previous years preceding the previous year 2035-36 other than under life insurance policies “X” and “Y”.
Taxability as per seventh proviso to clause (10D) of section 10 of the Act:
● The surrender value of life insurance policy “X” and consideration received under life insurance policy “Y” on maturity will be exempt under clause (10D) of section 10 of the Act since the annual premium does not exceed Rs 5,00,000 during the term of these policies.
● The consideration received under life insurance policies “A”, “B” and “C” will be taxable under clause (10D) of section 10 of the Act as per the provisions of seventh proviso to the said clause (10D) since aggregate of the annual premium payable for the life insurance policies “X” and “Y” for the previous year 2023-24 to 2033-34 was Rs 4,00,000. If the annual premium of life insurance policies “A” or “B” or “C” is added then the aggregate of the premium will exceed Rs 5,00,000 for the previous year 2024-25 to 2033-34.
● As per the provisions of seventh proviso, in case of multiple life insurance policies, the aggregate of the premium payable for all the policies which are claimed to be exempt under clause (10D) of section 10 of the Act shall not exceed Rs 5,00,000 for any previous year during the term of any of those policies.
Example 12: If in Example 11, the assessee does not claim exemption with respect to the surrender value of life insurance policy “X”, then the consideration received under life insurance policy “Y” will be exempt for the previous year 2034-25 and the consideration received under life insurance policy ‘‘B”’ will be exempt for the previous year 2035-36 under clause (10D) of section 10 of the Act. The exemption is restricted to life insurance policy “B” since the aggregate of the annual premium payable for the life insurance policies “Y” and “B” together did not exceed Rs 5,00,000 for any of the previous years during the term of life insurance policies “Y” or “B” and the assessee did not claim life insurance policy “X” as exempt. Life insurance policy “B” is preferred in place of life insurance policy “A” as it is more beneficial to the assessee.
Example 13: The assessee has the following life insurance policies and unit linked insurance policies (ULIPs) all of which satisfy all the conditions laid down in clause (10D) of section 10 of the Act (other than the conditions provided under the fourth, fifth, sixth and seventh provisos of the said clause, applicability whereof is being explained in the example). The assessee did not receive any consideration under any other eligible life insurance policies or unit liked insurance policies in earlier previous years preceding the previous year 2033-34 other than under unit liked insurance policy “X” and under life insurance policy “A”.
Taxability as per fifth and seventh proviso to clause (10D) of section 10 of the Act:
● As per the fifth proviso, the surrender value of unit linked insurance policy “X” and consideration received under unit linked insurance policy “Y” on maturity will be exempt under clause (10D) of section 10 of the Act since the annual premium does not exceed Rs 2,50,000 during the term of these policies.
● Further, the consideration received under the life insurance policy “A” during the previous year 2033-34 shall be exempt under clause (10D) of section 10 of the Act and will become old eligible life insurance policy for which exemption has been claimed. Then, for the previous year 2034-35, the consideration for life insurance policy ““C” only shall be exempt under clause (10D) of section 10 of the Act as the sum of premium of life insurance policies “A” and “C” does not exceed Rs 5,00,000 in any of the previous years during the term of these policies. The consideration for life insurance policy “B” is not exempt since sum of premium of life insurance policies “A”, “B” and “C” exceeds Rs 5,00,000 during the term of these policies. Life insurance policy “C” is preferred over life insurance policy “B” being more beneficial to the assessee. However, if the consideration from life insurance policy “A” was not claimed as exempt in previous year 2033-34, then the consideration from both the life insurance policies “B”’ and “C” shall be exempt under clause (10D) of section 10 of the Act.
Clarification on GST Component
5. In addition to the above, it is also clarified that the premium payable/ aggregate premium payable for a life insurance policy/ policies, other than a unit linked insurance policy, issued on or after the Ist day of April, 2023, for any previous year, shall be exclusive of the amount of the Goods and Service Tax payable on such premium. This can be explained by the following example:
Clarity on premium of Term life insurance policy
6. It is further clarified that the provision of the sixth and seventh proviso of clause (10D) of section 10 shall not be applicable in case of a term life insurance policy i.e. where sum under a life insurance policy is only paid to the nominee in case of the death of the person insured during the term of the policy and no amount Is paid to anyone if the insured person survives the policy tenure. Hence, any sum received under a term insurance policy shall continue to be exempt under clause (10D) of section 10 of the Act, irrespective of the amount of the premium payable in respect of such policy. Further the premium paid for such policies shall not be counted for checking Rs 5,00,000 limit for the purposes of sixth and seventh proviso.
(Sourabh Jain)
Under Secretary to the Government of India
){kind=link}
0 Comments