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Section 10(10D)
Exemption on receipts from life insurance policy (LIC)
Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy shall not be included in the total income of a person.
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In respect of policies issued between 1.4.2003 and 31.3.2012 |
Any sum received under a LIP including the sum allocated by way of bonus is exempt. However, exemption would not be available if the premium payable for any of the years during the term of the policy exceeds 20% of “actual capital sum assured”. |
Premium paid to the extent of 20% of “actual capital sum assured”. While calculating actual capital sum assured, (1) the value of any premiums agreed to be returned or (2) the value of any benefit by way of bonus or otherwise, over and above the sum actually assured, shall not be taken into account |
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In respect of policies issued on or after 1.4.2012 but before 1.4.2013 |
Any sum received under a LIP including the sum allocated by way of bonus is exempt However, exemption would not be available if the premium payable for any of the years during the term of the policy exceeds 10% of “actual capital sum assured” (has the same meaning as described in (a) below) |
Premium paid to the extent of 10% of “actual capital sum assured” |
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In respect of policies issued on or after 1.4.2013 |
Where the insurance is on the life of a person with disability or severe disability as referred to in section 80U or a person suffering from disease or ailment as specified under section 80DDB. |
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the sum allocated by way of bonus is exempt. However, exemption would not be available if the premium payable for any of the years during the term of the policy exceeds 15% of “actual capital sum assured” i.e., “minimum capital sum assured” under the policy on the happening of the insured event at any time during the term of the policy, not taking into account . |
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Add insurance policies issued on or after 1.2.2021 for claim of exemption u/s 10(10D)
In order to deter the practice of high net worth individuals from claiming exemption u/s 10(10D) by investing in ULIPs with huge premium, additional condition has been stipulated in respect of ULIPs issued on or after 1.2.2021. For this purpose, ULIP means a life insurance policy, which has components of both investment and insurance and is linked to a unit defined under IRDA (ULIP) Regulations, 2019.
Accordingly, exemption u/s 10(10D) would not be available with respect to any ULIP issued on or after 1.2.2021, if the amount of premium payable exceeds ₹ 2,50,000 for any of the previous years during the term of such ULIP. Moreover, in a case where premium is payable by a person for more than one ULIP issued on or after 1.2.2021, exemption u/s 10(10D) would not be available where the aggregate amount of premium exceed ₹ 2,50,000 in any of the previous years during the term of any such ULIP(s) issued on or after 1.2.2021.
However, in case of any sum received on the death of a person, exemption u/s 10(10D) would be available, even if the premium/aggregate premium for any year during the term of such ULIP/any such ULIP issued on or after 1.2.2021 exceeds ₹ 2,50,000.
In case any difficulty arises in giving effect to the provisions of this clause, the CBDT may issue guidelines for the purpose of removing the difficulty with the previous approval of the Central Government.
Every guideline issued by the CBDT shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and assessee.
Exemption is not available in respect of amount received from an insurance policy taken for disabled person under section 80DD
Any sum received under section 80DD(3) shall not be exempt under section 10(10D). Accordingly, if the dependent disabled, in respect of whom an individual or the member of the HUF has paid or deposited any amount in any scheme of LIC or any other insurer, predeceases the individual or the member of the HUF, the amount so paid or deposited shall be deemed to be the income of the assessee of the previous year in which such amount is Such amount would not be exempt under 10(10D).
Exemption is not available in respect of the sum received under a Keyman insurance policy
Any sum received under a Keyman insurance policy shall also not be Explanation 1 to section 10(10D) defines “Keyman insurance policy” as a life insurance policy taken by one person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person.
The term includes within its scope a keyman insurance policy which has been assigned to any person during its term, with or without consideration. Therefore, such policies shall continue to be treated as a keyman insurance policy even after the same is assigned to the keyman. Consequently, the sum received by the keyman on such policies, being “keyman insurance policies”, would not be exempt under section 10(10D).
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