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Taxation Central Ministry of Finance Income Tax Act, 1961

Guidelines under clause (l0D) of section 10 of the Income-tax Act. 1961

16-Aug-2023 | Circular No. 15 of 2023

Central Board of Direct Taxes has introduced guidelines under clause (10D) of section 10 of the Income-tax Act, 1961, effective from 16th August 2023. The main highlights of these guidelines are as follows: 1. Definition and Scope: (i) Eligible life insurance policy refers to any life insurance policy (excluding unit-linked insurance policy) issued on or after 1st April 2023. (ii) Consideration denotes the sum received, including bonuses, under an eligible life insurance policy. (iii) Current previous year refers to the preceding year in which consideration is received and its taxability is being examined. 2. Tax Exemption of Consideration: Consideration received during the previous year under an eligible life insurance policy will be exempt or non-exempt as per clause (10D) of section 10 of the Act. However, this exemption is subject to the fulfillment of other provisions under the said clause. Various scenarios are elucidated through illustrative examples. 3. Clarification on GST Component: In addition, it's clarified that for life insurance policies (excluding unit-linked insurance policies) issued from 1st April 2023 onwards, the premium payable or aggregate premium payable for any previous year will not include the amount of Goods and Service Tax (GST) applicable on the premium. This concept is exemplified by a detailed example. 4. Clarity on Premium of Term Life Insurance Policy: Furthermore, it is emphasized that the sixth and seventh provisos of clause (10D) of section 10 will not apply to term life insurance policies. These are policies where the sum is paid solely to the nominee upon the demise of the insured person within the policy term, and no payment is made if the insured person survives the policy term.

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