How to Report Life Insurance Maturity Amount in ITR?

As per Indian tax laws, life insurance proceeds must be accurately reported in Income Tax Return (ITR). To show the life insurance maturity amount in ITR, it’s essential to check whether the payout is exempt or taxable. If the policy meets the criteria under Section 10 (10 D) of the Income Tax Act, the entire maturity amount becomes tax free and if not, this needs to be reported as taxable income under "Income from other sources."

Understanding how to report maturity amount in Income Tax Return (ITR) is important to stay tax compliant, avoid mismatches with AIS/Form 26AS, and prevent future notices from the Income Tax Department. 

What is Life Insurance Maturity Amount?

The life insurance maturity amount is the lump sum amount paid by the insurer to the policyholder at the end of the policy term, provided the policyholder survives the policy tenure. This amount usually includes:

• Sum assured 
• Accrued bonuses
• Guaranteed additions
• Fund value (in ULIPs) 

Understanding what life insurance maturity amounts to the initial step in deciding where and how it should be reported in ITR. The tax treatment of this amount depends on policy type, issue date, and premium conditions mentioned under the Income Tax Act.  One must have proper documentation and reporting to ensure a hassle-free tax filling process.

Is Life Insurance Maturity Amount Taxed?

Life Insurance plans in India are generally exempt under Section 10(10D) of the Income Tax Act. If the policy meets the requirements, the entire maturity amount gets tax free and if not, then the amount becomes taxable, and you may also see TDS applied before the final payout is released. Tax exemption is subjected to the following conditions: 

• The premium paid should not exceed 10% of the sum assured (for policies issued after April 1, 2012).
• For policies issued between April 1, 2003, and March 31, 2012, the premium should not exceed 20% of the sum assured.
• ULIPs issued before 1 February 2021, irrespective of premium amount
• For ULIPs issued on or after February 1, 2021, if the annual premium exceeds ₹2.5 lakh, the maturity becomes taxable.

Please note that if the above conditions are not met, the life insurance maturity amount becomes taxable and must be reported accordingly. 

When Does Life Insurance Maturity Amount Become Taxable? 

A life insurance maturity amount gets taxable when it doesn’t meet specific criteria under Section 10(10D) of the Income Tax Act. 

• Premium-to-Sum Assured Ratio - If the annual premium exceeds 10% of the sum assured (for policies issued after April 1, 2012), the maturity proceeds become taxable. For policies issued earlier, this limit is 20%.
• Unit Linked Insurance Plans (ULIPs) issued on or after February 1, 2021, if the total annual premium exceeds ₹2.5 lakh, the maturity amount is taxed as capital gains, similar to equity investments.

It must be noted that any amount received on the death of the policyholder remains fully tax-free, regardless of the premium size or policy type.

Where to Report Life Insurance Maturity Amount in ITR?

The place where you report a life insurance maturity amount in your ITR depends entirely on whether the amount is tax-free or taxable. Even if no tax is payable, reporting is still mandatory.

1.If the Maturity Amount is Tax-Free

If your life insurance policy qualifies the exemption under Section 10(10D), the maturity amount is non-taxable. It can be reported under Schedule EI (Exempt Income) and must be mentioned in the Life insurance maturity amount under Section 10(10D). 

Commonly applicable for traditional endowment plan, money-back plan or eligible ULIP where premium conditions are met.

Note: This applies in both Old and New Tax Regimes. Even if TDS was deducted by mistake, the amount is still reported here, and the TDS can be claimed back.

2. If the Maturity Amount is Taxable (Non-ULIP Policies)

If your policy does not meet the specific criteria laid down by the Income Tax department under Section 10(10D), the maturity amount becomes taxable and must be reported under Income from Other Sources (Schedule OS).

Any taxable maturity amount received, or TDS deducted by the insurer which was auto picked from Form 26AS/AIS will get reported. 

This is commonly applicable to guaranteed return plans, and certain high premium traditional policies that fail against exemption rules.

3. If the Maturity Amount is Taxable ULIP (Issued on or after 1 Feb 2021)

If you have a ULIP issued on or after 1 February 2021 and the annual premium exceeds ₹2.5 lakh. Then the maturity amount is taxed like an investment, as it is treated similar to equity mutual funds, and it has to be reported under Schedule CG (Capital Gains). This section is mandatory, even if your insurer has already deducted TDS.

Which ITR Form Should You Use?

The correct ITR form depends on whether your life insurance maturity amount is tax-free or taxable, and how it is taxed. Choosing the wrong form can lead to rejection or notices. The table below helps you easily identify which ITR form applies based on the tax treatment of your maturity payout:

Note: ITR-1 cannot be used if any capital gains are involved.

How to Show Life Insurance Maturity Amount in ITR

To ensure return is processed smoothly and that any tax credits are properly reported; correct reporting is required. Here, how should it be done. Listed below is a step-by-step guide to report life insurance maturity amount in ITR.

• Step 1: Keep Documents Ready

It's important to have all the relevant documents in hand such as policy statements, payout received, and TDS certificate (Form 16A, if applicable).

• Step 2: Check & Verify TDS Details

 Check and review Form 26AS or the Annual Information Statement (ANS) to check if the insurer has deducted any TDS on the payout. 

• Step 3: Choose the Correct ITR Form

Always select the appropriate ITR form. ITR-1 to be used if the maturity amount is fully exempted and ITR-2/ITR-3 if the maturity amount is taxable or capital gains apply. 

• Step 4: Report Correct Income

Enter tax-free life insurance proceeds under the “Exempt Income” section (Schedule EI). If the maturity amount is taxable, report it under Schedule OS. If the tax is deducted at source, ensure TDS matches your Form 26AS/AIS.

• Step 5: Review and File: 

Double-check all entries before submitting your return to avoid errors or notices.

Whether your policy is a traditional plan, ULIP, or a guaranteed return plan , understanding its tax treatment is key to accurate ITR filing and better financial planning.

Illustration on How to Report Life Insurance Maturity Amount

Below are three simple illustration that shows exactly how different types of life insurance maturity amounts should be reported in ITR, depending on whether they are exempt, taxable or treated as capital gains.

Illustration 1: When the Maturity Amount is Tax-Free

Ram purchased a life insurance policy in 2016 with a sum assured of ₹10 lakh and an annual premium of ₹50,000 (<10%). He would receive the maturity amount of ₹8 lakh, TDS deducted by insurer ₹20,000. In this case, the premium is less than 10% of the sum assured, hence, the maturity amount gets tax exempted under Section 10 (10D). 

How Ram should report this in the ITR?

• In this case, ₹8 lakh is tax-free maturity amount.
• Ram reported ₹8 lakh under Schedule EI → Section 10(10D)
• Claim ₹20,000 TDS as refund which is reflected in in Form 26AS/AIS)

Illustration 2: When the Maturity Amount is Taxable

Ankit purchased a life insurance policy in 2015 with a sum assured of ₹10 lakh with an annual premium of ₹80,000 (>10%). He would receive the maturity amount of ₹6 lakh, and TDS deducted is ₹30,000. In this case, the premium is more than 10% of the sum assured, hence, the maturity amount is fully taxable.

How Ankit should report this in the ITR?

• Report the full ₹6 lakh maturity amount under Schedule OS – Income from Other Sources
• TDS credit of ₹30,000 will reflect automatically in Form 26AS/AIS
• Pay any additional tax due or claim a refund based on your final tax calculation

Illustration 2: When a ULIP Maturity Amount is Taxable

Amit invested in a ULIP in March 2022, with an annual premium of ₹3 lakh. He would receive a maturity amount of ₹12 lakh. Because his annual premium exceeds ₹2.5 lakh, the ULIP maturity amount becomes taxable as capital gains.

How Amit should report this in the ITR?

• Use ITR-2 or ITR-3 form, calculate the difference between maturity value and total investment as per insurer statement.
• Show the gains under Schedule CG-Capital Gains
• Verify any tax already deducted and pay balance tax, if applicable

Important Documents for Reporting Life Insurance Maturity Amount in ITR

Having the right documents in hand while reporting life insurance maturity amount in ITR is crucial for accuracy and compliance. Here is the list of documents one must keep handy: 

1. Policy Documents: The terms and conditions listed in the policy document including the sum assured, premium paid etc get confirmed. 
2.  Premium Payment Receipts: Verify the premium paid over the years and check the eligibility of tax exemption under Section 10(10D) of the Income Tax Act. 
3. Payout Certificate: This is issued by the insurer, this document details the amount received, including bonuses, which is required for reporting income correctly
4. Form 26AS / AIS (Annual Information Statement): These statements reflect all tax-related transactions, including TDS, and help to cross-verify the details before filing.
5. Pan and Aadhar Card: Both are mandatory for e-verification and return filling.

Every life insurance maturity payout, whether it is tax-free or taxable, must be disclosed in your ITR. Non-disclosure can lead to notices, penalty, or refund delays. By correctly identifying the tax status and reporting it in the correct section, you can file your return smoothly and stay financially transparent.

Quick reminder: Income-tax laws are subject to change. Always check the provisions that apply to the relevant Assessment Year (AY) before filing your return.