Taxation on Maturity Benefits: What Every Policyholder Must Know!

The maturity of life insurance policies in India are normally tax-free according to Section 10(10D) of the Income Tax Act. This exemption will apply to the entire maturity received, including bonus, subject to conditions. Under policies issued on or after April 1, 2012, the premium should not exceed 10% of the amount assured, while under policies issued prior to that date, the premium should not be more than 20%.

 

But if the policy is for a disabled person and the premium is more than 15% of the sum assured, or if the overall annual premium is more than ₹5 lakhs for policies sold after April 1, 2023, the maturity benefit is taxable. Also, TDS can be applicable in certain situations. Knowing these subtleties is important for policyholders so that they are not caught off guard with tax liabilities.

 

Source: ANI News, Policy Bazaar, HDFC Life, Clear Tax