The Central Board of Direct Taxes (CBDT) on August 16, 2023, issued the Guidelines under clause (10D) of section 10 of the Income-tax Act, 1961.
Clause (10D) of section 10 of the Income-tax Act, 1961 provides for income-tax exemption on any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy subject to certain exclusions.
The following guidelines have been stated and the same have been explained by way of situations and examples:
• "Eligible life insurance policy" means any life insurance policy (other than unit-linked insurance policy) issued on or after April 01, 2023;
• "Consideration" means the sum received (of any nature including bonus) under an eligible life insurance policy
• "Current previous year" means the previous year in which consideration is received and its taxability is examined
• Consideration received during the previous year under an eligible life insurance policy shall be exempt or not exempt under clause (10D) of section 10 of the Act, subject to the satisfaction of other provisions of said clause. The same are explained by way of examples of different situations: -
• Situation 1: No consideration is received by the assessee on any eligible life insurance policies during any previous year preceding the current previous year or consideration has been received on such eligible life insurance policies but has not been claimed exempt. The exemption under clause (10D) of section 10 of the Act shall be determined as under:
o If the assessee has received consideration, during the current previous year, under one eligible life insurance policy only and the amount of premium payable on such eligible life insurance policy does not exceed Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policy, such consideration shall be eligible for exemption under the said clause (10D) subject to fulfilment of other conditions;
o If the assessee has received consideration, during the current previous year, under one eligible life insurance policy only and the amount of premium payable on such eligible life insurance policy exceeds Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policy, such consideration shall not be eligible for exemption under the said clause (10D);
o If the assessee has received consideration, during the current previous year, under more than one eligible life insurance policy and the aggregate of the amount of premium payable on such eligible life insurance policies does not exceed Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policies, such consideration shall be eligible for exemption under the said clause (10D) subject to fulfilment of other conditions:
o If the assessee has received consideration, during the current previous year, under more than one eligible life insurance policy and the aggregate of the amount of premium payable on such eligible life insurance policies exceeds Rs 5,00,000 for any of the previous years during the term of such eligible life insurance policies, the consideration under only such eligible life insurance policies shall be eligible for exemption under the said clause (10D) where an aggregate of the amount of the premium payable does not exceed Rs 5,00,000 for any of the previous years during their term (Refer Examples) subject to fulfilment of other conditions.
[Circular No. 15 of 2023]
