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Hello readers, Today I will discuss two Important Amendments made in the Union Budget out of 122 amendments as all amendments in one article not easy to digest 

Article explains Rationalisation of exempt Income under life insurance policies and payments to Micro and Small Enterprises (MSEs) under section 43B of Income Tax Act, 1961

1. Rationalisation of exempt Income under life insurance policies:

We all know that -Section 10 (10D)- Income tax exemption on sum received under life insurance policy  provided premium payable on such policy should not exceed 10 percent of actual capital sum assured.

But several taxpayers are misusing the exemption by investing in policies having large premium contribution and thereafter claiming exemption on sum received under life insurance policies.

In order to prevent misuse, it is proposed to tax on sum received from Life insurance policies having premium or aggregate premium exceeding Rs 500000 in a year.

Income is proposed to exempt if received on the death of the insured person.

√ Now one point to remember that deduction of premium shall be allowed every year.

√ Above stated amendment applicable for all policies issued on or after 01.04.2023

√ Also you have to consider aggregate premium of all life insurance policies issued on or after 01.04.2023

√ Sum received under Life insurance policies which exceeds premium paid during the term of such life insurance policy shall be chargeable to income tax under the head ‘’Income from other sources’’

2. Promoting timely payments to Micro and Small Enterprises-

Now very important amendment relating to Section 43B-

We all know that Section 43B provides deduction to be allowed only on actual payment.

Now , in order to ensure that timely payment has been made to Micro and Small enterprises , New clause (h) has been inserted in Section 43B to provide- that any sum payable by the assessee to a micro or small enterprise beyond the time limit

specified in section 15 of the Micro, Small and Medium Enterprises Development

(MSMED) Act 2006 shall be allowed as deduction only on actual payment.

Now, Enterprises covered under Micro and Small Enterprises are-

Micro Enterprise

Small Enterprise
Investment in Plant and Machinery or Equipment:

Not more than Rs.1 crore and Annual Turnover ; not more than Rs. 5 crore

Investment in Plant and Machinery or Equipment:

Not more than Rs.10 crore and Annual Turnover ; not more than Rs. 50 crore

Section 15 of the MSMED Act mandates payments to micro and small enterprises within the time as per the written agreement, which cannot be more than 45 days. If there is no such written agreement, the section mandates that the payment shall be made within 15 days. Thus, the proposed amendment to section 43B of the Act will allow the payment as deduction only on payment basis. It can be allowed on accrual basis only if the payment is within the time mandated under section 15 of the MSMED Act.

Let us summarize important points-

1. Payment has to be made in 45 days only if there is written agreement otherwise 15 days.

2. Further, Deduction will be allowed only when payment will be actually made so nothing to do with due date of filling return of income.

3. Above stated amendments will be applicable from A.Y 2024-25.

That’s all for today ….next amendment in next article….

Queries/doubts related to above mailed at mamta0581@gmail.com

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One Comment

  1. DEEPAK V LALA says:

    Respected Sir/Madam,
    New Changes under section 10(10D) yearly premium above Rs.5 Lac will attract maturity Taxable but if I take policy on 15th May 2023 premium Rs.4.80 Lac incl. GST and next policy on 15th May 2024 then effectively on 15th May 2025 I will be paying 9.60 Lac will it attract tax on maturity or since policies purchased are on different dates will be exempt on maturity.
    Kindly guide please.

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