Articles March 20, 2020

How Income Tax 10D Will Benefit You?

Buying a life insurance plan has many benefits indeed. You secure your life and build up a corpus with a life insurance plan. If you die within the policy period, your loved ones get the death benefit and stay financially secure. If you outlive the policy period, you get a maturity benefit. Both of these are large payments and thankfully, they are tax-free. This is a life insurance advantage available under Section 10(10)D of the Indian Income Tax act. Read this article to know more about Income Tax 10(10)D and its benefits.

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Features and benefits of Income Tax Section 10(10)D

Let us glance over the features of Income Tax 10D to get a better understanding:

Application

The rule of Income Tax 10D applies to all plans bought between 1st April 2003 and 31st March 2012. Here, the premium paid annually cannot exceed 20% of the sum assured, else the tax exemption U/S 10(10)D will not apply towards the maturity proceeds

For policies bought after 1st April 2012, the premium payment cannot be more than 10% of the sum assured for section 10(10)D to be applicable.

The 10D tax benefit is available on all forms of life insurance including the endowment plans, term insurance plans, ULIPs, etc.

Exclusion

Any payout that happens in a Keyman Insurance plan does not qualify for the tax benefit available under Section 10D. You can not get a tax free income from your life insurance plan is it is a Keyman policy. Also, if the premium payment happens in a proportion larger than those mentioned above, you cannot get the income tax benefit under Section 10D on your life insurance policy income.

TDS clause

If the life insurance proceeds do not qualify for rebates under Section 10D, you have to pay TDS for them. For a policyholder who submits his PAN number, a TDS of 2% is deducted. When the PAN number is not submitted, the TDS goes up to 20%. So make sure you submit your PAN when you buy the life insurance plan.

Inform your family members about Income Tax 10D and all the features and benefits associated with it. If you die unexpectedly, they will receive the death benefit for which they do not have to pay any tax. Sadly, at times, agents and middlemen dupe the nominees of the deceased policyholders and extract amounts out of them claiming the tax clauses. Protect your dear ones from such frauds by simply explaining the clauses of Income Tax 10D to them beforehand.

In conclusion

A life insurance plan can be of use in various ways. First, it can offer financial protection to your family by offering the death benefit after your demise. Then, if you outlive the policy period, you get the maturity benefit, along with the bonus. These are all very handy incomes. But paying tax money out of these prove to be discouraging so the Income Tax 10D benefit proves to be of great help. Use it carefully and enjoy the benefits.

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