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Exemption of income

Rajat Sharma (Accountant ) (564 Points)

28 August 2020

Sir,I have received a sum of Rs 3 Lac on account of maturity of Bajaj Life insurance and the company has been deducted the tax at source @ 1% on maturity Sir I want to know that the in which section the said income claimed exempt.Thanking you.

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 28 August 2020

1. When the Annual premium paid on the policy does not exceed 10% of the sum assured for policies issued after 1 April 2012 and 20% of sum assured for policies issued before 1 April 2012– any amount received on maturity of a life insurance policy or amount received as bonus is fully exempt from Income Tax under Section 10(10D)

2. if Annual Premium paid on the policy exceed the 10%,/ 20% as the case may be, than (Maturity value less all Premium Paid) is taxable as income from other sources.

In your case...(Maturity value less all Premium Paid) is taxable as income from other sources as explained above in point No. 2

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alim dada (134 Points)
Replied 29 August 2020

If possible please explain with one simple example

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 30 August 2020

Suppose, One LIC policy have Sum assured 2,00,000 and Annual premium of Rs. 15,000.
than if Annual Premium is less than 10% of sum assured (i.e 10% of 2,00,000 =20,000) than full amount exempt.
In our case Annual premium Rs.15,000 is less than 20,000, So, Maturity value received is totally Exempt u/s 10(10D)

but If annual premium more than 20,000 than amount received on maturity is taxable but only income portion taxable, means (Maturity value received minus Premium Paid = Your Profit/interest) is taxable as income from other sources.

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