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Sec 10(10d) - policy with premium greater than 20% of s.a

Vinod (CA in Practice) (445 Points)

17 September 2012

Dear Friends,

Amounts received from insurance companies towards maturity proceeds of policies with premium more than 20% of sum assured are eligible for exemption u/s 10(10D) ?

I think, this 20% restriction is only for deduction u/s 80C (only 20% is eligible). But for 10(10D) all policies are covered.

Am i right ?

please share your views..

thanks a lot...

vinodaca74 @ gmail.com

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2 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 17 September 2012

As per the provisions of section 10(10)(d), any sums received under the insurance policy is exempt from tax. then it does not matter if premium paid was more than 20% of sum assured or no. The whole amt received is exempt.

Yes but for claiming deduction u/s 80C, the premium is restricted to only 20% of the sum assured. So if the premium exceeds 20% of the sum assured then only 20% of the sum asssured can be claimed as deduction.

CA Manish (Job) (5264 Points)
Replied 17 September 2012

If you have paid premium more that 20% of the sum asured then the amount received on maturity will be taxable.

Extracts of sec 10(10D):-

As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a Life Insurance Policy, including the sum allocated by way of bonus on such policy is exempt from tax. However, this rule does not apply if:-

any sum received other than as death benefit under an insurance policy which has been issued on or after April 1, 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the Actual Capital Sum Assured.