Deductions on Payouts of a Life Insurance Policy - Section 10 (10D) Income Tax Act - Make Money Online

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Deductions on Payouts of a Life Insurance Policy - Section 10 (10D) Income Tax Act


An investment in a life insurance policy is for the financial security of the family. It helps meet unexpected emergencies and the corpus will allow you to focus on your needs while the insurer will handle your financial requirements. Life insurance policies not only give a life cover but also offer benefits in the form of tax deduction under Section 80C and Section 10 (10D) of Income Tax Act, 1961.You can enjoy a deduction up to INR 1.5 lakh on the life insurance premium paid in a financial year.


Section 10(10D) of the Income Tax Act, 1961

You can claim tax benefits under Section 10 10Don the below-mentioned terms:

   The tax deduction will be applicable on the sum received in a life insurance plan, which means the death benefit and maturity benefit received from the policy

   The payout, which is not deductible under the‘Keyman Insurance Plan’, will be eligible for deduction in this section

   The premium amount paid in a year during the policy term should not exceed 20% of the sum assured for policies purchased between the period of April 1, 2003, and March 31, 2012; ifany policy is purchased after 2012, the premium should not exceed 10% of the sum assured.

   The premium amount in any year should not exceed 15% of the sum assured and it should not have been bought after April 1, 2013;it should be for an individual who is disabled or critically disabled as per Section 80U or suffering from an ailment as mentioned in Section 80DDB.

Things to keep in mind about Section 10(10D)

In case,the maturity benefit does not qualify for exemption under Section 10 of theIncome Tax Act.The amount will be subject to a Tax Deducted at Source(TDS) of 2% on the production of Permanent Account Number(PAN) card and at the rate of 20% on the non-submission of PAN card. TDS will be applied to the entire maturity benefit.

Exceptions in Section 10(10D) of the Income Tax Act, 1961

Listed below are a few exceptions to the deduction under Section 10 10D:

   The amount is received in case of a ‘Keyman Insurance Policy’
   The sum assured is received for sub-section 3 of the Section 80DD or sub-section 3 of Section 80DDA
   Any amount received from a policy issued after  April 1, 2003, and before March 31, March 2012, wherein the premium amount exceeds 20% of the sum assured
   Any amount received under a policy issued after  April 1, 2012, wherein the premium amount is more than 10% of the actual amount assured
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Eligibility for deduction under Section 10 (10D)

Individuals can avail of a tax deduction on all claims that include maturity benefit, death benefit, and accrued bonuses. The deduction can be availed on all policies but the payout under the‘Keyman Insurance Policy’ will not be eligible for a deduction. The deduction is applied to Indian and foreign life insurance companies.

The deduction limit for Section 10(10D)

The deduction under Section 10 is applicable on all claims against life insurance policies including accrued bonus. There is no upper limit to it.

Investment in a life insurance plan is the first step towards a strong financial future.You need to be aware of the tax benefits it offers in terms of premium payment and on the maturity amount. 
Deductions on Payouts of a Life Insurance Policy - Section 10 (10D) Income Tax Act Deductions on Payouts of a Life Insurance Policy - Section 10 (10D) Income Tax Act Reviewed by RAWAT on 11:09 PM Rating: 5