10 October 2013
Section 10(10D) of Income Tax exempts any income received from an Insurance Policy from Income Tax. This benefits policies such as Endowment Plans, Whole-life Plans and Unit Linked Plans, all of whose returns and bonuses become tax-free.
Eligibility for 10(10D) exemption
Any amount you get from a life insurance product- be it ULIP, traditional policy or term plan does not form part of your income that is taxable.
However the following are not exempted under section 10(10D)
- Payout on annuity or pension plan
- Insurance policy for a disabled dependent
- Employer sponsored group life insurance scheme
- Any policy where premium in any year is more than 20% of the sum insured if it were bought after 1st April 2003 but before 31st April 2012 or is more than 10% of the sum insured if it were bought after 1st April 2012
- Life insurance policy bought after 1st April 2013 for disabled or those suffering from ailments in section 80DDB if premiums are more than 15% of sum assured
The above conditions do not apply to death claims or any amount received on death of the insured person.
Maximum deduction limit under 10(10D)
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.
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