CBDT notifies new rules to calculate income from life insurance where premium exceeds Rs 5 lakh

The Income Tax Department has formulated rules to calculate the income from life insurance policy if the annual premium is more than five lakh rupees. The Central Board of Direct Taxes (CBDT) notified the Income Tax (Sixteenth Amendment) Act, 2023.

In this, Rule 11UACA has laid down the calculation of income in respect of the amount received on maturity of the life insurance policy.

This provision is for insurance policies where the premium amount is more than five lakh rupees. This rule also applies if such policy is issued on or after 1st April, 2023.

As per the amendment, for policies issued on or after 1st April, 2023, tax relief on maturity benefits under section 10(10D) will be applicable only if the total premium paid by an individual does not exceed five lakhs per annum.

Premiums paid in excess of five lakhs will be calculated from income and taxed at applicable rates. The Union Budget 2023-24 announced changes in the tax provisions in respect of life insurance policies other than ULIPs.

After calculating the income from premiums paid on premiums above five lakh rupees, tax will be levied. Experts informed that this tax will be calculated on maturity and then the entire amount will be paid.

At the same time, according to the Income Tax Department, the premium received after the death of a person will not be taxed.