Income tax

Many of us feel that the benefit amount we receive on the maturity of all life insurance policies is always tax-free. However that is not correct because not all life insurance policies will provide you a tax exemption on the maturity amount. Most of the Life insurance policies  offer tax benefits on the maturity amount but not all of them are tax-free. There are some conditions which a life insurance policyholder has to fulfill after which the policy availed by him/her is eligible for tax benefits. The proceeds received on maturity of the life insurance policy will be exempted from tax if the following conditions are fulfilled in accordance with section 10(10)D of Income tax Act:

1. The amount has been invested for a period of at least 5 years and has not been withdrawn before that

2. The ratio between Premium and Sum Assured is at least 1:5 in ALL the years and has not been violated even once.

If the above 2 criteria are fulfilled, then the maturity proceeds from the insurance policies are tax free under section 10(10)D, and not otherwise. If any one of the above conditions are violated even for 1 year, the maturity proceeds would not be tax free under section 10(10D).

Maturity proceeds includes bonus, interest etc.,