Generally, taxpayers invest in life insurance policies to save tax. But, due to new rules, this is no longer so easy. Because, if a premium of more than Rs 5 lakh is paid annually 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.
If you have a life insurance policy, then this news is useful for you, because if the annual premium of the life insurance policy is more than Rs 5 lakh, then income tax will have to be paid on the returns received from it. The government had announced this in the budget. Now the Central Board of Direct Taxes has notified the Income Tax Act in this regard.
In this notification, citing the 16th amendment of Income Tax, the Central Board of Direct Taxes said that according to Rule 11UACA, this new rule will be applicable to the policies issued on or after April 1, 2023 and whose premium amount is more than Rs 5 lakh. .
CBDT also clarified that if a person has more than one policy, the premium of all the policies will be added. If the premium amount 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.
Changes in tax rules related to life insurance policies were announced in Budget 2023-24. However, the new rules will not apply to Unit Linked Insurance Plan i.e. ULIP Plan. Apart from this, even if the insured dies before maturity, the entire amount will be out of the ambit of income tax. Even if the premium is more than Rs 5 lakh.
However, this new rule is problematic for those who take life insurance policies to save tax. Because, now the amount received on maturity will be taxable. In such a situation, saving tax will not be easy.
