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From Budget 2023, income from life insurance policies having premium or aggregate of premium above Rs 5 lakh were made taxable.
The ULIPs are tax-free upon maturity under section 10 (10) provided the premium does not exceed the limit of Rs 2.5 lakh per year. ULIPs issued on or after 1 February 2021 are liable to tax if the annual premium exceeds Rs 2.5 lakh.
As per Section 56 (2)(xiii), the sum which is received under excess or high premium life insurance policies is liable to tax under the head 'other sources'.
1: Tax Deferral;
Under this, a taxpayer may seek to receive the maturity amount of the policy upon completion of the policy term in instalments over several years, instead of getting it as a lump sum.
Under this, one buys multiple life insurance policies in a single year, with the total premium on all insurance policies not exceeding Rs 5 lakh. Upon maturity of the said policies, an individual can choose one policy with the lowest tax liability and offer to tax accordingly.