CBDT amends rules for life insurance with a premium of more than Rs five lakh

The Income Tax Department has amended the rules for calculating income from life insurance policies in case of an annual premium of more than Rs five lakh.

The Central Board of Direct Taxes (CBDT) has released the Income Tax Act with the sixteenth amendment in 2023 in which Rule 11UACA has provided for the method for calculation of income in respect of the amount received on maturity of a life insurance policy having annual premium of Rs five lakh.

This provision is applicable for those who have taken insurance policies with the premium amount of more than Rs five lakh after April first, 2023.

According to the amendment, the discount on various policies will be applicable under Act 10 (10D), when a person has paid Rs five lakh premium annually. If he pays more than this amount, then the extra premium will be included in the income and the tax will be levied according to the applicable rate.

Om Rajpurohit, joint partner, corporate and international taxes, AMRG & Associates, said that as per the formula, any surplus received on maturity will be taxed under the category of "income from other sources". The taxation provision for the amount received on the death of the insured has not been changed and will be exempted from income tax as before.

Important: The change in tax provision in life insurance policies except ULIPs (Unit Linked Insurance Plans) was announced in the union budget for the year 2023-24.