Life Insurance Policies not protect only your family against the unforeseen mishaps with bread-earner, even it exempts your income from Income Tax u/s 80C, and u/s 10(10D), in our previous article you have read about the Income Tax Act, 1961 Section 80(c) and 80(d), now I have Income Tax Act, 1961 Section 10(10D) which exempts income by Life Insurance Policies;
Under Section 10(10D) of the Income Tax Act, 1961; where Life Insurance Payouts are exempted, Section 10(10D) benefits are for all the policies related to ULIPs (Unit Linked Insurance Plans), Whole Life Insurance, Endowment Plans.
Amount received from Life Insurance Policy like Claim, Money-Back, Maturity, Bonus is tax-free whether amount credited by Indian or any Foreign Insurance Company.
Above mentioned amounts proposer/nominee get from life insurance plan does not be included in your Taxable Income.
And beauty of the 10(10D) is that there is no capping (maximum limit), whatever the amount you received under 10(10D) is Exempted till the below conditions meet or any Amendment in the Section 10(10D) of Income Tax Act, 1961.
The below mentioned are not exempted U/S 10(10D):-
- Group Life Insurance sponsored by Employer.
- Annuity or Pension Plan’s payouts.
- Disabled Person’s Life Insurance Policy where he is not proposer.
- Amount received u/s 80DD(3) and u/s 80DDA(3).
- Amount received under Keyman Policy.
- Policies issued on/after 1st Apr 2003 and if Premium paid more then 20% in any year during the PPT (Policy Payment Term), any amount other than death benefit.
- Policies purchased after 30th Apr 2012, with premium more than 10% of the Sum Assured.
- Policies purchased on/after 1st Apr 2013, with premium more than 15% of the Sum Assured, the insured person who is :- (i) Disabled Person as per Section 80(U) of Income Tax Act, 1961. (ii) Sick person as listed in the rules under section 80DDB of Income Tax Act, 1961.
Surrender Value of Life Insurance, will also be exempted only when the conditions fulfilled, u/s 10(10D).
In case, income from policy is not exempted u/s 10(10D), then amount subject to TDS (Tax Deduction at Source) per below mention rules;
- 2% TDS applicable, if PAN submitted.
- 20% TDS applicable, if PAN not submitted.