TAXABILITY OF INSURANCE POLICY MATURED

MR. A RECEIVED MATURED INSURANCE POLICY TREATED AS INVESTMEMT

1) WHETHER THIS IS TAXABLE OR NOT ? IF YES, THIS NEED TO BE TREAT AS INCOME UNDER OTHER SOURCES OR CAPITAL GAIN ?

Replies (2)
Quick Summary
This discussion clarifies the tax implications of matured life insurance policies. Generally, maturity proceeds are tax-exempt under Section 10(10D) of the Income Tax Act, provided the annual premium doesn't exceed a certain percentage of the sum assured. The specific exemption rules vary based on the policy issue date and the premium payment relative to the sum assured.

The maturity proceeds of a life insurance policy are exempted us/ 10(10D) of Income Tax Act, 1961 provided the premium paid in respect of the life insurance policy does not exceed 10% of the sum assured for any year during the premium paying term for the policies issued after 01-04-2012.

INCOME TAX ON MATURITY OF LIFE INSURANCE POLICY

1. Policy issued on Any Date before 01/04/2003 -
Claims including allocated bonus paid to the nominee in case of death of the policyholder is
100% Exempted from Tax

2. Life Insurance policy issued on or after 01-04-2003 but on or before 31-03-2012 -
If Annual Premium exceeds 20% of actual sum assured -
Maturity proceeds/ surrender value received shall be taxable.

3. Life Insurance policy issued on or after 01-04-2003 but on or before 31-03-2012
- if Annual Premium up to 20% of the actual sum assured -
100% exempted from tax

4. Life Insurance Policy issued on or after 01-04-2012 - if
Annual Premium exceeds 10% of actual sum assured -
Maturity proceeds/ surrender value received shall be taxable.

5. Life Insurance Policy issued on or after 01-04-2012 - if
Annual Premium paid up to 10% of the actual sum assured -
100% exempted from tax

6. Life Insurance Policy issued on or after 01-04-2013 for an insured person who is suffering from a severe disability or disease specified in section 80U or section 80DDB of the Income Tax Act
If Annual Premium exceeds 15% of actual sum assured
Maturity proceeds/ surrender value received shall be taxable.

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