Are maturity proceeds of single premium coverage totally taxable?

I perceive that maturity proceeds below Single Premium life insurance coverage insurance policies are usually not exempt below Section 10(10D). Are the total maturity proceeds handled? Can the policyholder declare indexation advantages treating the achieve as long-term capital good points?

In respect of life insurance coverage insurance policies issued after 1st April; 2012, the maturity proceeds acquired are exempt solely and provided that the premium payable in respect of such insurance coverage coverage doesn’t exceed 10% of the sum assured throughout the premium paying time period. So in case the premium in respect of a single premium coverage doesn’t exceed 10% of the sum assured, the maturity proceeds acquired shall be totally exempt. In case the premium paid was greater than 10% of the sum assured the distinction between the maturity worth and premium paid solely can be taxable and never the entire of such maturity proceeds. 

This is borne out by the supply of Section 194DA which requires deduction of tax at supply @ 5% of the quantity of revenue comprised within the fee made in respect of life insurance coverage insurance policies. Please observe that in respect of a single premium coverage, whereas arriving at 10% of the sum assured, you can’t apportion the premium of a single yr over the tenure of the insurance coverage coverage.

I really feel that an insurance coverage coverage might be handled as a capital asset and the identical can logically be inferred by taxation provisions of Section 112A in respect of ULIP insurance policies the place the premium paid exceeds Rs. 2.50 lakh throughout a yr. So you may avail the advantage of indexation on such premiums paid for these premiums paid past three years of maturity.

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Updated: 08 Aug 2023, 02:44 PM IST