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Taxability of LIC Maturity proceeds

Vinayak Kamath (Article Student) (75 Points)

27 October 2009

I wanted to clarify whether LIC maturity proceeds are taxable or not if the premium on such policy is more than 20% of the sum assured. If taxable, to what extent it is taxable?

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10 Replies

praveen (Chartered Accountant) (6971 Points)
Replied 27 October 2009

if Life insurance premium is paid more than 20% of the policy amount , then under section 80C you can claim deduction at 20% only.

While receipt of LIC Policy amount i dont think it will be taxable. As there is full exemption under section 10(10D)

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CA Suri Kota (Assistant Manager @ EY) (955 Points)
Replied 27 October 2009

Yes.....Praveen is correct. The excess of contribution is not allowed..........

Sandeep Pandey (CA FINAL) (1306 Points)
Replied 27 October 2009

Ya its correct. It is full exempted under section 10(10D).............................

Max Payne (employed) (2574 Points)
Replied 27 October 2009

u cant claim 10(10D) if your policy was taken after 01-04-2003 and ur premium exceeds 20% of the capital sum assured.

[(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—

(a) any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA*; or

(b) any sum received under a Keyman insurance policy; or

(c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 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:

(Guest)

Policy amt exceeding 20% is not allowed.....

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Mayank Ahuja ("Learner") (586 Points)
Replied 27 October 2009

Pls temme If nominee Gets Claim then whether it will taxable in his hands or not, if yes then upto what extent............

Example: Mr.A insured his life & taken policy of Rs. 10 lacs ( Sum Assured), & nominee is Mr. X, if Mr.A dies and entire amt is Taxable in hands of mr.X? Assume he is not minor.

Pls respond.

Max Payne (employed) (2574 Points)
Replied 27 October 2009

If received on the death of the person, it is fully exempt. there is a proviso that the sum is not taxable if received by heirs.

CA Devanshi Gandhi (Ajani) (FCA DISA Mcom CIFRS & LLB) (9060 Points)
Replied 27 October 2009

LIC maturity proceeds will be taxable as sec. 10(10D) point c says :

any sum received under an insurance policy (issued after 31/3/2003 in respect of which the premium paid IN ANY YEAR during the term of policy exceeds 20% of the actual sum assured.

deduction u/s 80C can be claimed only upto 20% of sum assured.

plz refer this section for defination of sum assured.

MANIKANDAN (STUDENT) (55 Points)
Replied 27 October 2009

hi friends CA Devnshi is correct.

as per sec 10(10D) The exemption does not apply to any amount received - under an insurace policy issued in respect of which the premium payable for any of the years exceeds 20% of the actual capital sum assured. however, if the amount is recieved on the death of a person, exemption shall be available for the entire amount without any restriction.