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pre maturity of LIC policy Taxability

Vijay Beniwal (Samalkha) (25 Points)

20 November 2018

Taxability of Pre matured life insurance policy

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Nivedita (SME - Finance) (758 Points)
Replied 20 November 2018

Deductions under Sec 80C are applicable.

Tax benefit received under - Sec 10(10D)

Seems the tax treatment remains the same either on maturity or surrender(pre-maturity)

Anjali P Nair (ACA,ACMA) (582 Points)
Replied 20 November 2018

As per Section 10(10D) of the Income Tax Act, 1961 the amount of sum assured plus any bonus (i.e. the policy proceeds) paid on maturity or surrender of policy or on death of the insured are completely tax free for the receiver subject to certain conditions.

1.life insurance policy issued after 1.4.2003 but on or before 31.3.2012 if the premium payable in any year doesnot exceed 20% of the actual sum assured .

2. Policies issued on or after 1.4.2012 premium payable in any year doesnot exceed 10% of the actual sum assured .

3. The insured suffers from severe disability or disease as specified by the Income Tax Act 1961, premium payable in any year doesnot exceed 15% of the actual sum assured .

TDS Provisions under section 194 DA

If the proceeds of life insurance policy are taxable then TDS provisions are applicable. In such cases tax is deducted at source under section 194DA of the Income Tax Act at the rate of 1% at the time of making payment if the amount of proceeds are more than Rs. 1,00,000/-..