Income tax: If you have got your life insurance done then this news is for you. Recently the Income Department has announced that you will have to pay this much tax on the income earned from life insurance policy of more than ₹ 500000. Let us know the news in detail…
New Delhi: The Income Tax Department has set rules for calculating the income from a life insurance policy in case the annual premium is more than Rs 5 lakh.
The Central Board of Direct Taxes (CBDT) has notified the Income Tax Act (Sixteenth Amendment), 2023. In this, rule 11UACA has been prescribed for calculating income in relation to the amount received on maturity of life insurance policy.
This provision is for those insurance policies in which the premium amount is more than Rs five lakh and such policies are issued on or after April 1, 2023.
What will be the new rules on insurance policies?
As per the amendment, for policies issued on or after April 1, 2023, tax exemption on maturity benefit under section 10(10D) will be applicable only if,
When the total premium paid by an individual is up to Rs 5 lakh annually. The amount received for premium in excess of this limit will be added to the income and tax will be levied as per the applicable rate.
The change in tax provisions regarding life insurance policies except ULIP (Unit Linked Insurance Plan) was announced in the budget for the financial year 2023-24.
When will the amount become tax free?
Om Rajpurohit, joint partner (corporate and international tax), AMRG & Associates, said that as per the formula, any surplus amount received on maturity will be taxed under the category of ‘income from other sources’.
The taxation provision for the amount received on the death of the insured has not been changed and it will be free from income tax as before.