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Tax on Insurance Policy : Bought insurance policy to save tax, but rules have changed, now income tax will have to be paid on life insurance

Tax on Insurance Policy: Taxpayers who buy life insurance policy to save tax are going to be difficult from this year. The government has made a big change in the budget 2023 regarding the life insurance policy. Now income tax will be charged on its maturity.

Life insurance policy has become a necessity after the Corona epidemic, but even today most people see it only as a means of saving tax. This type of policy gives triple benefit, due to which most people see it as a good option. But, in the budget of the year 2023, the government has changed the rules related to the insurance policy.

Actually, in the budget, the government had announced that if the annual premium of life insurance policy is more than Rs 5 lakh, then income tax will have to be paid on its return. Now the Central Board of Direct Taxes (CBDT) has issued a notification on Wednesday stating that if a premium of more than Rs 5 lakh is paid on a life insurance policy, then its return will be considered as part of the income and income tax will have to be paid on it.

Citing the 16th amendment of Income

Tax in its notification, CBDT has said that according to Rule 11UACA, the new rule will apply to life insurance policies purchased after April 1, 2023. Under this, if the total premium of policies in a year is more than Rs 5 lakh, then income tax will be levied on the income earned from it.

If there is more than one policy then…

In the changed rules regarding the insurance policy, it has been clearly said that if there are more than one policies, then the premium of all will be calculated together. If their premium is not more than Rs 5 lakh, then the return received on its maturity will be completely tax free. Under section 10(10D) of Income Tax, income tax exemption is available on the amount received on maturity of the insurance policy. But, now if the premium amount is more than 5 lakhs, then the money received on its maturity will come under the ambit of income tax.

… still there is a chance of tax exemption

The government has changed the rule of life insurance, but still the chance of tax exemption will be available. In fact, despite the change in the rules, it has been said that the limit of 5 lakhs will not be applicable on any ULIP insurance policy. It has been said in the budget 2023-24 that except for ULIP policy, the rule of premium of 5 lakhs will be applicable. Apart from this, if the policyholder dies before the maturity of the policy, even then his entire amount will be out of the purview of income tax. Even if its premium is not more than Rs 5 lakh.

Bhupendra Pratap
Bhupendra Pratap
Bhupendra Pratap has over 3 years of experience in writing finance content, entertainment news, cricket and more. He has done BA in English. He loves to Play Sports and read books in free time. In case of any complain or feedback, please contact me @insuranceindiaain@gmail.com
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