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Exemption under Section 10(10D)

30 June 2019

In case where premium is paid by parents and the maturity proceeds are received by the children in their bank accounts, then will those maturity proceeds be exempt under 10(10D) in the hands of children?

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8 Replies

Kritika Shetty (accounts) (311 Points)
Replied 30 June 2019

YES, provided the annual premium qualified 10% or less of assured value.

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Suresh Thiyagarajan (Student) (3986 Points)
Replied 30 June 2019

1. According to sec 10(10D), LIC maturity amount will be exempted if the premium paid is not more than 10% of the sum assured.
2. However, it is exempted only in the hands of the person who has taken the above policy even if the maturity amount is received by some other person. In your case, the amount will be exempted only in the hands of parents. If the maturity proceeds were provided to the children after that, it will be treated as a gift in the hands of Children (not taxable).
3. In either transaction, there will not be any tax liability. But the correct way is to show the above maturity amount in the hands of parents and claim exemption u/s 10(10D).
Please correct me if the above interpretation has an alternative view.

Shivangi Garg (12 Points)
Replied 01 July 2019

The policy was in the name of children. Parents just paid the premium since they were minor and had no source of income. When the maturity proceeds were received, they had turned major and had source of income.

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