Tax on a Single Premium Insurance Policy
Section 10(10D) does not provide exemptions on the maturity amount from a single premium insurance policy. But there are no taxes on the maturity benefit amounts if the sum assured is ten times the amount of premium payable for the policy duration.
Tax Exemption for ULIP Plans Under Section 10(10D)
The Finance Bill 2021 proposed amendments to Section 10(10D) tax exemptions suggesting that the provision must not apply to ULIPs purchased on or after February 1, 2021, and the aggregate annual premium of all plans due in a fiscal year is more than ₹2,50,000. After the ULIP policy does not qualify for the exemptions, it will remain as is except at the time of death claim. The premium amount payable includes top-up premium, riders, GST and loading on riders (if any).
As per the amendments, ULIP plans will be categorised as capital assets. All maturity, surrender, or partial withdrawal proceeds will be taxed to the policyholder as Capital Gains.
In the unfortunate event of death, the entire death benefits are tax exempted. Regardless of the threshold on aggregate premium, the benefits received on the death of the policyholder will continue to be tax-free.