Section 10(10D)
Section 10(10D) is a part of the Indian Income Tax Act.
It says that the money you receive from a life insurance policy is not taxable, if certain conditions are met.
This means, when your insurance plan matures or is paid out due to death, you (or your family) may not have to pay any tax on the money received.
What is Exempt Under Section 10(10D)?
- Maturity amount from life insurance
- Death benefit paid to family
- Bonus added to the policy
All these are fully tax-free, as long as the policy follows the rules mentioned under this section.
Conditions for Tax Exemption
To enjoy tax-free money under Section 10(10D), your policy must meet these conditions:
- Premium should not be more than 10% of the sum assured (for policies after April 1, 2012)
- For older policies (before April 1, 2012), premium should not exceed 20% of sum assured
- Policy must not be a high-value ULIP (Unit Linked Insurance Plan) issued after Feb 1, 2021, with yearly premium over ₹2.5 lakh
- Death claims are always tax-free, no matter what
Exceptions – When Tax is Payable
You might need to pay tax if:
- Your policy does not meet the premium limits
- You have a ULIP with high premium
- You surrender the policy early and get money back
In these cases, the money is taxed as “Income from Other Sources”
Real-Life Example 1:
Ravi buys a life insurance policy with ₹10 lakh sum assured. He pays ₹80,000 premium per year. After 15 years, he gets ₹18 lakh as maturity amount.
Since the premium is less than 10% of sum assured, the full ₹18 lakh is tax-free under Section 10(10D).
Real-Life Example 2:
Suman buys a ULIP in 2022 with a ₹3 lakh yearly premium. At maturity, she gets ₹20 lakh.
Since her yearly premium crossed ₹2.5 lakh limit for ULIPs (new rule), this amount may be taxable.
Why Section 10(10D) is Important
- Helps protect your insurance returns from tax
- Encourages people to save and invest in life insurance
- Useful for estate planning and family security