As we know, various benefits are attached to the life insurance policy, and tax benefit is one such key benefit. The tax benefit is available in terms of income tax deduction and income tax exemption. Provisions of section 80C offer the income tax deduction, whereas, provisions of section 10(10D) provides the income tax exemption.

Under the current article, we would evaluate the income tax exemption available under provisions of section 10(10D) of the Income Tax Act.

Life Insurance Policy

Analyzing the exemption provisions of section 10(10D)

Provisions of section 10(10D) of the Income Tax Act exempts any amount received under a life insurance policy. Such amount also includes the sum allocated in the form of bonus on such policy.

The following can be concluded by summing up the provisions of section 10(10D)

1. Exemption under section 10(10D) is available on any amount received under a life insurance policy. Such amount includes death benefits, maturity benefits and, accrued bonus.

2. The exemption is available on all the forms of life insurance policy claims.

3. The entire amount received under a life insurance policy is exempt under section 10(10D). Meaning thereby that there is no upper limit applicable to the claim against the life insurance policy.

4. There are certain exceptional cases, wherein, the exemption is not available under section 10(10D) [the same are listed below].

Exclusions under section 10(10D) of the Income Tax Act

Exemption under section 10(10D) of the Income Tax Act is not available under the following circumstances-

1. Any sum received under section 80DD(3) of the Income Tax Act. Any sum received under section 80DDA(3) of the Income Tax Act.

2. Any amount received under the Keyman Insurance Policy.

Please note ‘Keyman Insurance Policy’ means the life insurance policy taken by a person-

  • On the life of another person who is (or was) the employee of the first mentioned person; or
  • On the life of another person who is (or was) connected, in any manner, with the business of the first mentioned person.

3. Any sum received under an insurance policy, if the following criteria are satisfied-

Sr. No. Criteria of the period of issue of insurance policy Criteria of premium
1 The insurance policy issued on or after 1st April 2003 but on or before 31st March 2012 The premium payable, exceeds 20% of the actual capital sum assured, for any of the years (during the term of the policy).
2 The insurance policy issued on or after 1st April 2012 The premium payable, exceeds 10% of the actual capital sum assured, for any of the years (during the term of the policy).

Further, it is also relevant to note here that in sr. no. 2 above (under criteria of premium) the premium payable, for any of the years, exceeds 15% (instead of 10%) of the actual capital sum assured would be applicable in case the following points are satisfied-

1. The insurance policy issued on or after 1st April 2013; and

2. The insurance policy is in respect of the life insurance of-

  • The person with a disability or the person with severe disability (as referred under section 80U); or
  • The person suffering from disease or ailment as referred in rules made under section 80DDB.

It is important to note here that exemption under section 10(10D) is available against any amount received on the death of a person (even if the criteria mentioned, in the table above, at sr. no. 1 or sr. no. 2 is satisfied).

Table – Articles on Section 10 Exemptions

Sr. No. Particulars
1 Section 10(1)– Exemption to Agricultural Income
2 Section 10(2) Exemption to amount received by co-parcener from HUF
3 Section 10(2A) Exemption towards share of income from firm/LLP
4 Exemptions towards interest to non-residents | Section 10(4) & 10(4B)
5 Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company
6 Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India
7 Exemption- Section 10(8A) & section 10(8B) of Income Tax Act
8 Exemption towards commuted value of pension Section 10(10A)
9 Exemption towards retrenchment compensation received by workman Section 10(10B)
10 Section 10(10BC) Exemption towards compensation received on account of any disaster
11 Section 10(10C) Exemption of amount received on voluntary retirement
12 Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)
13 Section 10(10D) Exemption towards amount received under a Life Insurance Policy
14 Exemption for amount received from Statutory & Recognized PF
15 Exemption for payment from approved superannuation fund Section 10(13)
16 Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)
17 Section 10(15) Exemption- Interest on Bonds, Debentures, Securities
18 Scholarship exemption | Section 10(16) | Income Tax Act 1961
19 Exemption towards income for administration of Charitable or Religious Institution
20 Section 10(32) Exemption | Income of minor clubbed with parent
21 Exemption for dividend income received from Indian Company | Section 10(34)
22 Section 10(34A) Exemption towards income received by a shareholder on buy back of shares
23 Section 10(35) Exemption towards income received from units
24 Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land

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17 Comments

  1. Vaibhav Shah says:

    I have a LIC jeevan Umang policy. Which is whole life plan and Premium paying term is for 15 years. If in case I will surrender my policy after Premium paying term, what can be taxability over it?

  2. Bin says:

    Hi, I have taken HDFC SL Crest Life Insurance Policy (ULIP policy) on 10/6/2011 for myself, with policy term of 10 years and premium paying term as 5 years. My annual premium is Rs. 99990. Sum assured is Rs. 999900. I have paid the premium for all 5 years and it ‘s maturity date is on 10/6/2021. Lock in period is over on this policy by 10/6/2016. Due to covid conditions the fund value of this policy had gone down drastically with a risk of losing my initial investment itself, I had to surrender this policy. So, I have surrendered this policy in the months of April 2020 and I have received the surrendered Policy amount of Rs. 741272.86. I have checked the section 10(10D), It says for ULIP policies taken between 1 April 2003 to 31 March 2012, if the policy is surrenderd after lock in period i.e., 5 years and if any premium paid during any of financial year during term does not exceed 20% of sum assured, then surrender value amount is exempted. My understanding as per this, the surrender amount is exempted.. My question is, for FY2020-21, is my surrender amount is taxable or exempted amount. Could you please clarify my understanding and confirm the same if it is exempted amount

  3. PARUL says:

    1. For Resident Indian: Is section 10(10D) applicable in case of HDFC Sanchay Plus Spl (A non-participating non-linked savings
    insurance plan) where premium payment is Rs10 lakhs per year for 5 years and payout after 6th year for next 30 years is Rs 355340 per year and ROI at 36th year .
    2. Also please confirm the same is applicable if the person is an NRI . Thank you.

  4. Manish Jain says:

    I have LIC unit linked insurance plan 802. It is maturing after 10 years in May 2021. Do I have to pay income tax on settlement in case I opt for 10 equal installments over 5 year period.

  5. S S RAO says:

    lic table 916 BHIMA BHACHAT ,FOR 15 YEARS TERM ,MONEY BACK AFTER 3 YEARS AND MATURITY EXCEMPTION FROM INCOME TAX SECTION 10 [10D] OR NOT

  6. Rudresh says:

    Hi, i have taken SBI money back gold policy for 15 years sum assured 9 lakhs and yearly premium paying 78,900/-, after completion of 3 year now i received 15% of survival benefit 1,35,000/- but they deducted TDS at 3.75% so received on 131,200/- does TDS applicable in this policy and under which section of the income tax.

  7. Vijay Kumar says:

    The post posted on 28th Dec was a query regarding tax clarification not a comment, Please clarify. Thanks
    1.Is pension received from Insurance company against one time investment made in retirement benefit insurance policy, be considered under Section 1010D clause for IT exemption.
    2.If part of retirement benefit received from company & part this if reinvested in Insurance retirement benefit scheme, can this be considered for IT exemption under1010D or any other clause.

  8. Vijay Kumar says:

    1.Is pension received from Insurance company against one time investment made in retirement benefit insurance policy, be considered under Section 1010D clause for IT exemption.
    2.If part of retirement benefit received from company & part this if reinvested in Insurance retirement benefit scheme, can this be considered for IT exemption under1010D or any other clause.

  9. amolgandhe says:

    Have a query regarding tax treatment on redemption of Uti Ulip units.
    Uti ULIP 15 year plan – declining insurance. Start date July 1997 and maturity was July 2012. All units were sold in February 2020. Insurance premium was Rs.16.5 every year out of Rs.1000 installment every year and remaining was invested. Life Insurance Coverage was declining every year – Rs.15,000 at the beginning and declining by Rs.1000 every year. Will I get 10(10D) exemption? The capital gain statement from Uti mutual fund shows capital gain of Rs.50000 with indexation.

  10. Krishna says:

    Like to know for a pension plan of lic paid one time premium for which policy holders are getting annuity amount yearly. Is that annuity amount received is covered under sec10(10)D.get tax benefits.

  11. john alex says:

    when we say “capital sum assured” ….. is it the death sum assured.
    In Jeevan Shiromani plan of LIC the Death Sum Assured is the higher of
    1… !.25 times of basic Sum Assured
    2. 10 times of annual premium paid.
    3….
    so for section 10(10D) what is the Sum assured…. kindly appraise

    1. CA Harshad Adatiya says:

      What is Sum Assured ?
      The income tax law has used the term ‘sum assured’ as ‘Actual Capital Sum Assured’ and is defined in Section 10(10D) read with Explanation to Section 80C(3A). As per the Explanation, “actual capital sum assured” in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—

      (i) the value of any premium agreed to be returned; or

      (ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

      Tax on maturity proceeds from a Life Insurance Policy

      Therefore, the term ‘sum assured’ means the amount payable by the insurance company to the insured on the happening of the event for which the policy is taken without taking into consideration the allocated bonus and return of premium if any. In layman terms, it is the value of the policy on which the insurer fixes the premium amount.

      It is to be noted that if the premium payable in any year during policy term or period exceeds the prescribed percentage of 10% or 15% or 20%, then the proceeds from the life insurance policy on maturity or surrender loses the exemption. However, if a policy is issued before 01.04.2003 and still in force then the maturity or surrender proceeds will remain tax-free. For example, if a life insurance policy is issued on 10th March 2003 for a period of 30 years, the same will remain exempt, as per current provisions of the law, even if the premium exceeds 10% or 15% or 20%, as the case may be, in the year 2033 when the policy will mature. The situation will not alter if the policy is surrendered before the maturity period.

  12. kasim srinivas says:

    HI exemption under 10(10D) rule applicable as per the insurance contract date or at the time of maturity ? in other words,if there is any future changes in 10(10d) will effect my future maturities irrespective of insurance contract date ? please clarify

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