Taxation of Life Insurance Policies of premium exceeding Rs. 5 Lakh: An overview of CBDT Circular
CBDT has issued Circular No. 15/2023 issued on August 16, 2023, outlines crucial guidelines in light of the Finance Act, 2023 amendment to Section 10(10D). Effective from Assessment Year 2024-25, significant changes impact the tax exemption of sums received from life insurance policies.
Here is a short overview of the CBDT Circular as under:
Sums received under life insurance policies (excluding ULIP) issued on or after April 1, 2023, won’t be exempt under Section 10(10D) if the premium payable for any previous year during the policy term exceeds Rs. 5 lakh. If multiple policies exist, the exemption is applicable only if the aggregate premium for any previous year remains below Rs. 5 lakh for these policies.
“Consideration” refers to sums received under eligible policies, including any bonuses.
Receipt on death of person:
This rule doesn’t apply to sums received on an individual’s death.
The copy of the circular is as under: