WayToInsurance.com

life Insurance plans reviews and all that you need to know about Life Insurance

SECTION 10(10D) FOR MATURITY RETURNS

SECTION 10(10D) FOR MATURITY RETURNS

10(10D) Tax Rebate

 

Section 10(10D) of Income Tax Act exempts any income received from an Insurance Policy from Income Tax. This includes all the maturity amount, death claim amount, surrender value of all type of policies. This benefits policies such as Endowment Plans, Money Back plans, Term Plans, Whole-life Plans and Unit Linked Plans, all of whose returns and bonuses become tax-free.

To avail tax benefit under Section 10(10D) for Maturity returns, the policy have to satisfy the following conditions.

Eligibility for 10(10D) exemption

Policy Taken after 31st April 2012

  • If it is a traditional policy, the premium per year of the policy should be lesser than 10% of the Sum assured.

Ex: If sum assured of a policy is Rs.100000, to get tax rebate the premium should be lesser than Rs.10000 per year. If the premium limit increases above Rs.10000 in this case, it is not eligible to get the exemption under Section 10(10D).

  • If it is a ULIP policy, the sum assured should be a minimum of 10 times of the premium paid per year.

Ex: If premium paid under your ULIP policy is Rs 100000, the sum Assured under this case should be a minimum of Rs 1000000 to get Tax rebate.

  • In case of a pension plan, 1/3rd of the Maturity amount can be withdrawn as tax free lump sum. The balance of the maturity amount has to be purchased as annuity from the insurance company.
  • Ex: If the maturity amount is Rs 100000, the maximum amount that can be withdrawn as tax free is 33,333.

Policy Taken Before 31st April 2012

  • If it is a traditional policy, the premium per year of the policy should be lesser than 20% of the Sum assured.

Ex: If sum assured of a policy is Rs.100000, to get tax rebate the premium should be lesser than Rs.20000 per year. If the premium limit increases above Rs.20000 in this case, it is not eligible to get the exemption under Section 10(10D).

  • If it is a ULIP policy, the sum assured should be a minimum of 5 times of the premium paid per year.

Ex: If premium paid under your ULIP policy is Rs 100000, the sum Assured under this case should be a minimum of Rs 500000 to get Tax rebate.

  • In case of a pension plan, 1/3rd of the Maturity amount can be withdrawn as tax free lump sum. The balance of the maturity amount has to be purchased as annuity from the insurance company.
  • Ex: If the maturity amount is Rs 100000, the maximum amount that can be withdrawn as tax free is 33,333.

 

IMPORTANT POINTS TO BE NOTED ON SECTION 10(10D) FOR MATURITY RETURNS

  1. If the maturity of your policy is not exempted under Section 10(10D) then the amount you receive from such policy is subject to a TDS (Tax deducted at source).
  • If pan is submitted 2%TDS on total Maturity amount.
  • If pan Is not submitted 20% TDS on the total maturity amount is applicable
  1. The pension income received from Pension plans are taxable and are considered as a normal income.
  2. Employee Sponsored Group Insurance schemes
  3. Key man insurance Proceeds
  4. The above conditions do not apply to death claims or any amount received on death of the insured person.
  5. Surrender value is also exempt from income tax as per section 10(10D) provided conditions above are not violated.
  6. If the policy is not exempted under this section, you have to understand that you can still deduct the total premium paid from the income part. i.e. The returns or interest received or Bonus if any is only can be included as taxable income.

Maximum deduction limit under SECTION 10(10D) FOR MATURITY RETURNS

There is no cap on the extent of tax free income from life insurance proceeds. Any amount received is exempted from income tax as long as conditions above are fulfilled.

9 Comments

Add a Comment
  1. THE INVESTMENT IN ICICI PRU LIFELINK WEALTH SP OF INR 200000 ONE TIME PREMIUM PAID IN DEC2010 CALLS FOR INCOME AX LIABILITY ON WITHDRAWAL ON AUGUST 2016 . PLEASE EXPLAIN

    1. Dear Reader,

      Most of the single premium policies does not comply with section 10(10d) exemption requirements. Main reason for the tax liability on the single premium policies is that they dont have an 10 times sum assured. Check if your policy is having the following benefit.

      * 10 times of your annual premium as Sum assured
      ( in your case your premium is 2 Lac. So the sum assured should be atleast 20 lac to get benefit under section 10(10d))

      Feel free if you have any more query.

      Thanks

  2. If I Didn’t Claim exemption under sec80(C) still then is it taxable?
    If yes what is the amount?
    (I mean to say Whether I am eligible to deduct Premium paid amount?)

    1. Dear Reader,

      Even if you didnt claim it in 80C section, if the policy doesnt come under 10(10d) exemption,maturity amount is taxable. You cannot deduct premium paid amount. But it differs from policy to policy. For detailed query you can reach us at mywaytoinsurance@gmail.com

      Thanks

  3. To be eligible for exemption u/s 10(10D). the annual premium should not exceed 10% of sum assured. What does “sum assured” mean? Is it the sum assured on the death of the insured’s life? Please clairfy.

    1. Dear Sankar,

      Yes it is death sum assured.

      Thanks for writing.

  4. While filing ITR-1, I’m not seeing column for sec10(10D). How can I declare this benefit in ITR?

    Like dont I need to add it to the “income from other source”? or I have to add to “Income from other source” and claim exemption from some where else?

    Note: Assume all the conditions were satisfied and benifit is eligible u/s 10(10D).

  5. Thanks sir.
    Pl clear my doubt sir.
    Recently Dec’16 I recived one LIC maturity amount of Rs.119000/- (include bonus) from a policy which sum assure is 100000/- ( premium 25500/year for 5year plan). my question is wether the maturity is shown in IT and is taxable or not?

  6. But is it now unfair and unjust to pay income tax on the premium paid at the time of maturity.

    Income tax should be applicable only to the benefits out of premium paid.

Leave a Reply

Your email address will not be published. Required fields are marked *

WayToInsurance.com © 2016 | Love Peace | Site Map |