Section 10(10D)

The payout should not have been under keyman insurance policy

• It should also not be annuity or pension plan payout
• It should be a death benefit amount
• The benefit received is not for an insurance policy issued u/s 80DD?(1) of the Income Tax, Act, 1961
• The benefit amount should have not been paid under group insurance scheme
• The premium amount payable under any financial year should not be more than 15% of the sum assured. The policy must have been bought on or after April 1, 2013 and it should be for a person who is:
• Disabled or severely disabled under section 80U of the Income Tax Act
• Has a disease or an ailment specified in the rules u/s 80DDB of the IT Act

If the maturity amount is not tax exempt u/s section 10(10D), the amount received will be subject to TDS as per the below rules:

• If the PAN number is submitted then 10% TDS will be deducted from total amount of maturity
• If the PAN number is not submitted then 20% TDS will be deducted from total amount of maturity

The Budget 2021 announcement specified that tax exemption is not applicable for ULIPs issued on or after 1 Feb 2021 if the annual premium payment exceeds Rs. 2.5 lakh in any year during the policy term.

Budget 2023: removal of exemption on high value insurance policies

In the latest Budget 2023 announcement, the finance minister announced the removal of exemption from high value insurance policies having aggregate premiums up to Rs. 5 lakhs. The exemption will not impact the policies issued till March 31, 2023.