Winning Bizness Desk

Mumbai: Life insurance policies with a premium of more than five lakhs will no longer get tax relief. The Central Board of Direct Taxes (CBDT) has amended the Income Tax Act rules and accordingly a new rule has been implemented and this rule will be applicable for policies issued on or after April 1, 2023. In the budget presented in February 2023 (Union Budget 2023), it was said that the tax exemption on insurance policies with a premium of more than five lakhs will be deleted. It will be implemented now. The Income Tax Department has formulated rules to calculate the income from life insurance policies if the annual premium is more than five lakh rupees.

CBDT issued a circular on August 16

The Central Board of Direct Taxes (CBDT) issued a circular on August 16. It has notified new guidelines under section 10 (10D) of the Income Tax Act, 1961. Under this section, income tax relief is mentioned on the purchase amount of life insurance policy. Those whose insurance premium amount (Life Insurance Policies) is more than five lakh rupees will no longer get tax exemption from insurance. As per the new amendment, for policies issued on or after April 1, 2023, tax relief on maturity benefit under Section 10 (10D) will be applicable only if the total premium paid by an individual does not exceed five lakhs per annum.

Changes were announced in Budget

Amounts received for premiums in excess of this limit will be added to income and taxed. Changes in the tax provision in respect of life insurance policies except ULIPs (Unit Linked Insurance Plans) were announced in the Budget for the financial year 2023-24. According to tax experts, any additional amount received on maturity would be taxed under the category 'income from other sources'. The taxation provisions for the amount received on the death of the insured have not changed and will be exempt from income tax as before.