Income Tax Section 10(10D) provides a valuable opportunity to policyholders to avail tax exemption on the maturity amount of life insurance policies. Let us know about it in detail.
Section 10(10D) of the Income Tax Act, 1961 is a provision that provides tax exemption to insurance policy holders under special conditions. This section is very important for those seeking tax benefits while ensuring financial security through insurance. Let us understand here when and how insurance policy buyers can get exemption under Section 10(10D) of the Income Tax Act.
When can one avail tax exemption under Section 10(10D)?
To qualify for tax exemption under section 10(10D), certain conditions must be fulfilled:
Maturity of the insurance policy: The insurance policy should be a life insurance policy, and the discount is available only when the policy matures. Maturity means that the policy has reached the end of its term, and the policyholder is eligible to receive the maturity income.
Premium Limit: The premium paid during the policy term should not exceed a certain percentage of the sum insured. As per my last knowledge update in September 2021, the limit was 10% of the sum assured for policies issued on or after April 1, 2012, and 20% for policies issued before this date.
Tax benefit conditions: To enjoy tax benefits, the insurance policy must comply with Section 80C and Section 10(10D) together. Section 80C provides deduction for premiums paid, subject to an aggregate limit of Rs 1.5 lakh.
Maturity amount: Exemption under section 10(10D) applies to the amount received on maturity of the insurance policy. This maturity amount should be tax-free.
