Income Tax exemption on money received from Life Insurance policy: CBDT issues new guidelines

financialexpress.com:

The Central Board of Direct Taxes (CBDT) has issued fresh guidelines under clause (10D) of Section 10 of the Income Tax Act 1961. Clause 10(D) of Section 10 of the IT Act provides for income-tax exemption on any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy. However, such an exemption is subject to certain exclusions.

The CBDT guidelines have come after the Finance Act 2023 removed tax exemption on any sum received from life insurance policies for which the aggregate annual premium is more than Rs 5 lakh.

1. Premium paid for a single policy: As per Finance Act 2023, any sum received under a life insurance policy, other than a unit-linked insurance policy, issued on or after 1 April 2023 will not be exempt under Clause 10(D) of Section 10 of the IT Act if the amount of premium payable for any of the previous years during the term of such policy is more than Rs 5 lakh. This will be applicable from AY 2024-25.

2. Premium paid for multiple life insurance policies: For policies issued on or after 1 April 2023, exemption under Clause 10D will not be available for any policy for which the total annual premium is more than Rs 5 lakh in any year during the policy term.

“if premium is payable for more than one life insurance policy, other than a unit linked insurance policy, issued on or after 01.04.2023, the exemption under the said clause shall be available only with respect to such policies where the aggregate premium does not exceed Rs 5,00,000 for any of the previous years during the term of any of those policies,” CBDT said.

However, the exemption will be available for any amount paid as a premium in case of the death of the policyholder and in case of term insurance