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Section 10 (10d) of income tax

Vishnu (Student CA IPC / IPCC) (58 Points)

11 August 2016

Good Afternoon All,

I gone through Section 10 (10D) of Income Tax Act and want to know whether Insurance Amount received on maturity Taxable or not? If it is Taxable whether we have to pay tax on full amount or Bonus amount only? If amount is exemped as per section 10(10D) where should i show exemption amount?

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4 Replies

Atush Jain (Asst. Professor) (162 Points)
Replied 11 August 2016

LIC Maturity amount is exempted from tax.

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Udgam Koomar (Tax Technologist) (1949 Points)
Replied 11 August 2016

Why should the principle amount be taxable atall?? There is no question

Rajiv Bhargava (Accountant) (21 Points)
Replied 11 August 2016

Amount of life insurance is fully exempted under income tax.

Kamalakar Agashe (Chief Engineer Turbine) (92 Points)
Replied 25 September 2016

Originally posted by : Vishnu

Good Afternoon All,

I gone through Section 10 (10D) of Income Tax Act and want to know whether Insurance Amount received on maturity Taxable or not? If it is Taxable whether we have to pay tax on full amount or Bonus amount only? If amount is exemped as per section 10(10D) where should i show exemption amount?

If you have read Sec 10 (10D) you will find that Maturity proceeds of following policies are not exempt:

(c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 but on or before the 31st day of March, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured ; or

(d) any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured:

If your Policy falls in (c) or (d) the amount is taxable.You have to pay tax on full amount (excuding the premium) as per Circular no 7/2003:

10.3 The insurance policies with high premium and minimum risk covers are similar to deposits or bonds. With a view to ensure that such insurance policies are treated at par with other investment schemes, amendments have been made in section 88 and clause (10D) of section 10. The existing clause (10D) of section 10 has been substituted so as to provide that the exemption available under the said clause shall not be allowed on any sum received under an insurance policy issued on or after the 1st day of April, 2003, in respect of which the premium payable in any of the years during the term of the policy, exceeds twenty per cent of the actual capital sum assured. In view of this, the income accruing on such policies (not including the premium paid by the assessee) shall become taxable. However, any sum received under such policy on the death of a person shall continue to remain exempt. The new provision also provides that the amounts received under sub-section (3) of section 80DD, shall not be exempt under this clause.