Maturity proceeds of life insurance policies with annual premium of over Rs 5 lakh to be taxed: FM

Income Tax

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Feb 02, 2023

An individual will have to pay tax on the maturity amount of life insurance policies where the aggregate annual premium exceeds Rs 5 lakh, according to a Budget proposal presented on Wednesday. Finance Minister Nirmala Sitharaman in the Union Budget proposed "to provide that where aggregate of premium for life insurance policies (other than ULIP) issued on or after April 1, 2023, is above Rs 5 lakh, income from only those policies with aggregate premium up to Rs 5 lakh shall be exempt".

This will not affect the tax exemption provided to the amount received on the death of a person insured. It will also not affect insurance policies issued till March 31, 2023, she said.

Nidhi Manchanda, Certified Financial Planner, Head of Training, Research & Development at Fintoo, said that one of the major setbacks that are given in the finance bill is related to the taxability of the maturity proceeds of a life insurance policy.

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