Receipts from LIC [Section 10(10D)] :
This clause clarifies that any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy shall not be included in the total income of a person.
Recently, policies were introduced in respect of which the premium payable was very high. Sometimes, such premium was payable on a one-time basis. They are similar to deposits or bonds. With a view to ensure that such insurance policies are treated at par with other investment schemes, clause (10D) has been rationalised as follows –
In respect of policies issued between 1.4.2003 and 31.3.2012
(i) Any sum received, under an insurance policy issued on or after 1.4.03 in respect of which the premium payable/paid during any of the years during the term of the policy exceeds 20% of the actual capital sum assured, shall not be exempt. Therefore, sum received in respect of such policies issued prior to 1.4.03 will continue to enjoy exemption.
(ii) However, such sum received under such policy on the death of a person shall continue to be exempt.
(iii) For the purpose of calculating the actual capital sum assured under this clause,
(a) the value of any premiums agreed to be returned or
(b) the value of any benefit by way of bonus or otherwise, over and above the sum actually assured, shall not be taken into account. Such premium or bonus may be received either by the policy holder or by any other person.
(iv) Any sum received under section 80DD(3) shall not be exempt under this clause in addition to sum received under 80DDA(3) or under a Keyman insurance policy .
In respect of policies issued on or after 1.4.2012
(i) Any sum received, under an insurance policy issued on or after 1.4.2012 in respect of which the premium payable/paid during any of the years during the term of the policy exceeds 10% of the actual capital sum assured, shall not be exempt.
(ii) However, such sum received under such policy on the death of a person shall continue to be exempt.
(iii) In respect of policies issued on or after 1st April, 2012, the actual capital sum assured shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account –
(a) the value of any premiums agreed to be returned or
(b) the value of any benefit by way of bonus or otherwise, over and above the sum actually assured which is to be or may be received under the policy by any person,
In effect, in case the insurance policy has varied sum assured during the term of policy then the minimum of the sum assured during the life time of the policy shall be taken into consideration for calculation of the ―actual capital sum assured‖ for the purpose of section 80C and section 10(10D), in respect of life insurance policies to be issued on or after 1st April, 2012.
(iv) Any sum received under section 80DD(3) or section 80DDA(3) shall not be exempt. Further, any sum received under a Keyman insurance policy shall also not be exempt.
Explanation 1 to section 10(10D) defines ―Keyman insurance policy‖ as a life insurance policy taken by one person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person. The scope of the term ―keyman insurance policy‖ has now been amplified to include a keyman insurance policy which has been assigned to any person during its term, with or without consideration. Therefore, such policies shall continue to be treated as a keyman insurance policy even after the same is assigned to the keyman. Consequently, the sum received by the keyman on such policies, being ―keyman insurance policies‖, would not be exempt under section 10(10D).
In respect of policies issued on or after 1.4.2013
Any sum received under a life insurance policy including the sum allocated by way of bonus on such policy would be exempt, where the policy is issued on or after 1st April, 2013 and is for insurance on life of any person, who is –
(1) a person with disability or person with severe disability as referred to in section 80U; or
(2) suffering from disease or ailment as specified in the rules made under section 80DDB, and the premium payable for any of the years does not exceed 15% of minimum capital sum assured. Where the insurance is on the life of any person, other than the persons mentioned above, exemption would be available only if the premium payable for any of the years during the term of the policy does not exceed 10% of ―minimum capital sum assured‖ under the policy on the
happening of the insured event at any time during the term of the policy.