The Central Board of Direct Taxes (CBDT) has introduced new regulations for computing income from life insurance policies with premiums above Rupees 5 lakhs. This means that section 10(10) of the Income Tax Act which usually specifically exempts certain sums received from life insurance policies including bonuses will no longer apply to such policies, effective from April 1, 2023. This move aims to provide clarity and prevent ambiguity when calculating income from substantial life insurance policies.
According to the notification released by CBDT, starting from the assessment year 2024-25, sums received from life insurance policies excluding unit-linked insurance policies, issued on or after April 1, 2023, will no longer be exempt if the premium payable for any previous year during the policy’s term exceeds Rupees 5 lakhs.
Additionally, in cases where premiums are payable for multiple life insurance policies (excluding unit-linked insurance policies) issued post-April 1, 2023, exemption under the mentioned clause will apply only to policies where the total premium doesn’t exceed Rupees 5 lakhs for any previous year during the policy’s tenure. However, these provisions will not be applicable in cases of sums received upon an individual’s demise.
The CBDT circular reads, “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),” it added.
Also, have a look at : IT department launches tax-evasion probe against social media influencers