Tax on Insurance Policy: It is going to be difficult for taxpayers who buy life insurance policies to save tax from this year. The government has made a big change in the life insurance policy in Budget 2023. Now income tax will be collected on its maturity.
Although life insurance policy has become a necessity after the Corona epidemic, even today most people see it only as a means to save tax. This type of policy provides triple benefits, due to which most people see it as a good option. But, in the budget of 2023, the government has changed the rules related to insurance policies.
In fact, the government had announced in the budget that if the annual premium of a life insurance policy is more than Rs 5 lakh, then income tax will have to be paid on its returns. 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 returns will be considered part of the income and income tax will have to be paid on it.
When will it be applicable on policies purchased?
CBDT, in its notification, citing the 16th amendment of Income Tax, has said that according to Rule 11UACA, the new rule will be applicable on 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 i.e. returns.
If there is more than one policy then…
In the changed rules regarding insurance policy, it has been clearly stated that if there are more than one policies then the premium of all will be calculated together. If their premium does not exceed 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 Rs 5 lakh then the money received on its maturity will come under the ambit of income tax.
There is still a chance of tax exemption.
The government has changed the rules of life insurance, but there will still be a chance of tax exemption. In fact, despite the change in the rules, it has been said that the limit of Rs 5 lakh will not be applicable on any ULIP insurance policy.
It has been said in the Budget 2023-24 that except ULIP policies, the rule of premium of Rs 5 lakh will be applicable on all other policies. Apart from this, even if the insured dies before the maturity of the policy, the entire amount will be out of the scope of income tax. Even if its premium is more than Rs 5 lakh.
