CBDT Notifies Rule 11UACA to Compute Taxable Income in Respect of Sum Received Under Life Insurance Policies

Notification No. 61/2023, dated 16-08-2023

The Finance Act, 2023 has inserted a new clause (xiii) to section 56(2). This new clause provides for the taxability of any sum received under a life insurance policy [other than Unit Linked Insurance Policy (ULIP) and Keyman Insurance Policy], to which exemption under Section 10(10D) does not apply. Any income arising from such receipt shall be chargeable to tax under the head ‘Income from Other Sources’.

Pursuant to such amendment, the Central Board of Direct Taxes (CBDT) has notified Rule 11UACA prescribing the manner of computation of income for the purpose of section 56(2)(xiii). Income arising from the sum received from such policies is calculated in the following manner:

1. Sum received under the Life Insurance Policy for the first time

If the assessee has received the sum from such Life Insurance policy for the first time, then the income shall be the amount received, including the amount allocated by way of bonus, as reduced by the aggregate of premium paid during the term of such policy, till the date of receipt of such sum.

2. Sum received under the Life Insurance policy for second and subsequent times

Where the assessee has received any sum from such Life Insurance policy not for the first time, the income shall be the amount received during the subsequent previous year, as reduced by the amount of premium paid during the term of such policy until the date of receipt of such sum. However, the premiums already considered while computing income in earlier years shall not be considered.

Note: If a deduction has been claimed under any other provision of the Act in respect of premium, the amount of such premium shall not be considered while computing the income.

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