Section - 10(10D) of Income Tax Act, 1961

Extracts of Section 10(10D) of Income Tax Act:

(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—

  (a) any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA; or

  (b) any sum received under a Keyman insurance policy; or

  (c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 but on or before the 31st day of March, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured; or

  (d) any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured:

Provided that the provisions of sub-clauses (c) and (d) shall not apply to any sum received on the death of a person:

Provided further that for the purpose of calculating the actual capital sum assured under sub-clause (c), effect shall be given to theExplanation to sub-section (3) of section 80C or the Explanation to sub-section (2A) of section 88, as the case may be:

³⁶[Provided also that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—

  (i) a person with disability or a person with severe disability as referred to in section 80U; or

 (ii) suffering from disease or ailment as specified in the rules made under section 80DDB,

the provisions of this sub-clause shall have effect as if for the words "ten per cent", the words "fifteen per cent" had been substituted.]

Explanation 1.—For the purposes of this clause, "Keyman insurance policy" means a life insurance policy taken by a 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 ³⁶[and includes such policy which has been assigned to a person, at any time during the term of the policy, with or without any consideration];

Explanation 2.—For the purposes of sub-clause (d), the expression "actual capital sum assured" shall have the meaning assigned to it in the Explanation to sub-section (3A) of section 80C;

Nothing big deal in this section:

Let me explain this section in this way:

Firstly, any sum received under a life insurance policy including bonus on such policy is EXEMPT from tax. But the below sums received, are taxable:

(1)    Sum received under an insurance policy commenced on/after 01-Apr-2003 but on/before the 31-Mar-2012 on which premium payable for any of the years during the policy period exceeds 20% of the actual capital sum assured

(2)    Sum received under an insurance policy commenced on/after 01-Apr-2012 on which premium payable for any of the years during the policy period exceeds 10% of the actual capital sum assured

(3)    Sum received under a KIP, Keyman insurance policy (Example for KIP policy structure:-Policy taken by your employer and employer paid premiums and you received the maturity amount)

(4)    Sum received under sub-section (3) of section 80DD (In case of death of person taking responsibility of a disabled person, the dependant gets the maturity amount and its taxable)

(5)    Sum received under insurance policy, for person with severe disability or suffering from disease mentioned in Section 80DDB, commenced on/after 01-Apr-2013 on which premium payable for any of the years during the policy period exceeds 15% of the actual capital sum assured

If the sum mentioned in point (1) & (2) above are received on the death of a person is EXEMPT.

In a NUT SHELL

Sl. No	Cases	Taxability
1	Maturity amount received for a policy commenced before 01-Apr-2003 (% of annual Premium payable on the policy is irrelevant)	Exempt
2	Maturity amount received for a policy commenced on/after 01-Apr-2003 and before 31-Mar-2012 (21% of Premium is payable on the policy every year)	Taxable
3	Maturity amount received for a policy commenced on/after 01-Apr-2003 and before 31-Mar-2012 (20% of Premium is payable on the policy every year)	Exempt
4	Maturity amount received for a policy commenced on/after 01-Apr-2012 (11% of Premium is payable on the policy every year)	Taxable
5	Maturity amount received for a policy commenced on/after 01-Apr-2012 (10% of Premium is payable on the policy every year)	Exempt
6	Maturity amount received for any policy on the death of a person (% of annual Premium payable on the policy is irrelevant)	Exempt
7	Maturity amount received for any KIP. (% of annual Premium payable on the policy is irrelevant)	Taxable
8	Maturity amount received as per section 80DD(3). (% of annual Premium payable on the policy is irrelevant)	Taxable
9	Maturity amount received as per section 80DDB, commenced on/after 01-Apr-2013 (16% of Premium is payable on the policy every year)	Taxable
10	Maturity amount received as per section 80DDB, commenced before 01-Apr-2013 (% of annual Premium payable on the policy is irrelevant)	Exempt