Is your life insurance premium above Rs 5 lakh? Check new tax rules

Image Source : PEXELS A Woman Holding a tax document

The Income Tax Department on Wednesday presented new standards for calculating income proceeds from life insurance policies where the yearly premium exceeds Rs 5 lakh. The Central Board of Direct Taxes (CBDT) has issued the Income Tax Amendment (Sixteenth Amendment) Rules, 2023, which presents rule 11UACA.

New provision

This standard relates to the estimation of income upon maturity of life insurance policies issued on or after April 1, 2023, with premium sums surpassing Rs 5 lakh.

As per the change, for policies issued on or after April 1, 2023, the tax exemption on maturity benefits under Section 10(10D) might be relevant in the event that the total premium paid by an individual depends on Rs 5 lakh a year. For premiums past this cutoff, the returns will be added to the income and charged at applicable rates.

The adjustment of tax provisions with regard to life insurance policies, with the exception of ULIP, was announced in the Union Budget 2023–24. According to the formula, any overflow sum got on development would be likely to burden under the head “pay from different sources”, said AMRG & Associates Joint Partner (Corporate & International Tax) Om Rajpurohit as quoted by the news agency PTI.

Motive behind the provision 

The provision was acquainted with invalidate charge benefits given to ventures masked as insurance policies, said AKM Global Tax Partner Amit Maheshwari. The motive behind the decision taken by CBDT is to eliminate troubles, since this provision would influence numerous people, particularly the rich. The rules are intricate and give different models on the calculation of the thought that qualifies for exclusion, Maheshwari added.

Also read | Gross direct tax collections rise almost 16 per cent to Rs 6.53 lakh crore so far in current fiscal: CBDT

Also read | Old income tax regime with higher deductions remains more attractive for taxpayers than the new one

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