section 10(10)D of the Income Tax Act, 1961

As per Section 10(10D) of the Income Tax Act, 1961 the amount of sum assured plus any bonus
(i.e. the policy proceeds) paid on maturity or surrender of policy or on death of the insured are
completely tax free for the receiver subject to certain conditions.
These policy proceeds will be taxable in the hands of the insured in the following situations:
o As per section 10(10D) in case of a life insurance policy issued after 1.4.2003 but on or before
31.3.2012 if the premium payable in any year exceeds 20% of the actual sum assured, then the
policy proceeds would be taxable in the hands of the insured. As per section 10(10D) read with
explanation to Section 80C(3A), actual sum assured simply means the sum assured which is least
in all the policy years and does not include any bonus amount which is to be received over and
above the assured amount. This 'actual sum assured' shall also not include any premiums which
are to be returned to the policyholder.
o For policies issued on or after 1.4.2012, the above mentioned limit of 20% has been changed to
10%.
In case the insured suffers from severe disability or disease as specified by the Income Tax Act
and rules and his/her policy was issued on or after 1.4.2013, then for them the limit of 10% will
be increased to 15%. For this purpose, disability has to be one of those specified in section 80U
(like autism, mental retardation) and disease has to be one of those specified in section 80DDB
read with Rule 11DD of income tax rules such as blindness.
o In case the premium payable in any year exceeds the prescribed percentage i.e. 10%, 15% or
20% of actual sum assured, as described in the preceding paragraphs, then the whole proceeds
from the policy would get taxed in the year of receipt. However, in case of death of the insured,
where his nominees receive the policy proceeds the same shall be tax free in the hands of the
nominee(s) even if premium paid in any year crossed the prescribed percentage of sum assured.
Proceeds of Keyman insurance policy not tax free
If a policy is a Keyman insurance policy then its proceeds are not tax free as per section 10(10D)
of the Income Tax Act.
Is TDS applicable to payment of life insurance policy proceeds?
As per section 194DA of the Income Tax Act, 1961, any sum received by an insured Indian
resident from an insurer under a life insurance policy shall be subject to TDS @ 2% if the said
sum is not exempted under section 10(10D). This means that policy proceeds exempted under
section 10(10D) will be given to the insured without TDS (Tax Deduction at Source). Further,
even if these proceeds are taxable as per section 10(10D) but do not exceed Rs 100,000, then
also no TDS is to be deducted by the insurer when making the payment to the insured.
It is important for you to know that you have to submit you PAN to your insurer or else the rate
of TDS would be 20% instead of 2% in cases where TDS is applicable.
Further, it is to be mentioned that tax treatment of life insurance policies bought from foreign
insurers (those not registered in India) may involve additional conditions which would vary from
case to case. Life insurance policies can be useful tax planning tools, because the policy holder is
eligible for tax benefits under the Income Tax Act 1961 (Act). Though there are multiple modes
for saving tax, life insurance is one of the most effective tax planning instrument. Plans from
Max Life Insurance can be used for protection, long term savings and tax planning. There are
two kinds of income tax benefits available to individuals with respect to long term savings being
made in Life Insurance policies:

 Deductions
 o 80C/80CCC:
 Benefit is available to Individual assessee and Hindu Undivided Family
assessee.
 In case of individual assessee - Himself/herself, spouse, children of
such individual
 In case of HUF assessee - any member of HUF
 If the amount of premium paid in a financial year for a policy is in excess
of 20% of the actual capital sum assured, then deduction will be allowed
only for premiums upto 20% of the sum assured.
 For insurance policies issued on or after April 01 2012, deduction is
allowed for only so much of the premium payable as does not exceed 10%
of the actual capital sum assured.(15% of actual capital sum assured in
case of person with severe disability or specified ailment).
 Above benefits shall be reversed if the policy is terminated/cease to be in
force within 2 years for traditional products and 5 years for ULIP products
after the date of commencement of policy.
 Sec 80CCE - Maximum amount of deduction that an assessee can claim
under Sections 80C, 80CCC will be limited to Rs. 150,000.
o 80D
 Benefit is available to Individual assessee and Hindu Undivided Family
assessee.
 In case of individual assessee - Himself/herself, spouse, dependent
children and parents of such individual
 In case of HUF assessee - any member of HUF
 The qualifying amounts under Section 80D for self, spouse and dependent
children is upto Rs. 15,000/- and additional deduction upto Rs. 15,000/-
for the parents. However, a higher amount of upto Rs. 20,000/- is
permitted for parents, if they are senior citizens. Assessee is allowed to
make any payment on account of preventive health checkups upto Rs.
5,000 within prescribed overall limit.
o 80DD: Premiums paid for disabled dependent are eligible for deduction up to Rs.
50,000 every year. A higher deduction of Rs. 75,000 shall be allowed, where such
dependent is a person with severe disability.
 Exemptions
o 10 (10D): Any sum received under a life insurance policy, including the sum
allocated by way of bonus on such policy will be exempt from tax. However, this
rule does not apply to following amounts:
 Sum received under Section 80DD(3), or
 A sum received under a Keyman Insurance Policy, or
 Any sum received other than as death benefit under an insurance policy
which has been issued on or after April 1 2003 and if the premium payable
in any of the years during the term of the policy does not exceed 20% of
the sum assured. For insurance policies issued on or after April 01 2012,
exemption would be available for policies where the premium payable for
any of the years during the term of the policy does not exceed 10% of the
actual capital sum assured.(for policies issued on or after 01 April
 2013,15% of actual capital sum assured in case of person with severe
disability or specified ailment).

DISCLAIMER:

 The above are extracts from the Income Tax Act’1961. Please note that tax laws are
subject to change and hence before placing reliance on the above, the latest version of the
relevant sections should be checked. It should also be noted that the change in tax laws
could have retrospective effect also.
 This information should not be construed as expert tax, legal or investment opinion from
Max Life Insurance Company Limited. Max Life Insurance Company Limited would not
be responsible in any manner for decisions made on the basis of above information.
 Please consult your tax advisor for claiming tax benefits on insurance products.
 Sec 194DA of Income Tax Act 1961 provides for deducting tax (TDS) on policyholders
payout under life insurance policy w.e.f. 01 Oct 2014. TDS, if applicable, will be
deducted at 2% if valid PAN is available upto 31st May 2016. W.e.f. 01st June 2016,
TDS rates has been reduced to 1%. Policyholders can furnish forms 15G/15H for non
deduction of TDS where total income /estimated total income during financial year does
not exceed maximum amount not chargeable to tax. Further in case valid PAN is not
available, rate of TDS would be 20%.
 Get Income tax saving benefits by investing in life insurance policies under section
80C/80CCC & 80D/80DDD. Policy holder is eligible for tax benefits under the Income
Tax Act 1961

LIFE INSURANCE CONTRACT:

Parties to contractThe person responsible for making payments for a policy is the
policy owner, while the insured is the person whose death will trigger payment of the
death benefit. The owner and insured may or may not be the same person. For example, if
Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his
wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner
is the guarantor and he will be the person to pay for the policy. The insured is a
participant in the contract, but not necessarily a party to it.

Chart of a life insurance

The beneficiary receives policy proceeds upon the insured person's death. The owner designates
the beneficiary, but the beneficiary is not a party to the policy. The owner can change the
beneficiary unless the policy has an irrevocable beneficiary designation. If a policy has an
irrevocable beneficiary, any beneficiary changes, policy assignments, or cash value borrowing
would require the agreement of the original beneficiary.

In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV),
insurance companies have sought to limit policy purchases to those with an insurable interest in
the CQV. For life insurance policies, close family members and business partners will usually be
found to have an insurable interest. The insurable interest requirement usually demonstrates that
the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents
people from benefiting from the purchase of purely speculative policies on people they expect to
die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for
insurance proceeds would be great. In at least one case, an insurance company which sold a
policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds),
was found liable in court for contributing to the wrongful death of the victim (Liberty National
Life v. Weldon, 267 Ala.171 (1957)).

Contract termsSpecial exclusions may apply, such as suicide clauses, whereby the policy
becomes null and void if the insured commits suicide within a specified time (usually two years
after the purchase date; some states provide a statutory one-year suicide clause). Any
misrepresentations by the insured on the application may also be grounds for nullification. Most
US states specify a maximum contestability period, often no more than two years. Only if the
insured dies within this period will the insurer have a legal right to contest the claim on the basis
of misrepresentation and request additional information before deciding whether to pay or deny
the claim.

The face amount of the policy is the initial amount that the policy will pay at the death of the
insured or when the policy matures, although the actual death benefit can provide for greater or
lesser than the face amount. The policy matures when the insured dies or reaches a specified age
(such as 100 years old).

Costs, insurability, and underwritingThe insurance company calculates the policy prices
(premiums) at a level sufficient to fund claims, cover administrative costs, and provide a profit.
The cost of insurance is determined using mortality tables calculated by actuaries. Mortality
tables are statistically based tables showing expected annual mortality rates of people at different
ages. Put simply, people are more likely to die as they get older and the mortality tables enable
the insurance companies to calculate the risk and increase premiums with age accordingly. Such
estimates can be important in taxation regulation.[8][9]

In the 1980s and 1990s, the SOA 1975–80 Basic Select & Ultimate tables were the typical
reference points, while the 2001 VBT and 2001 CSO tables were published more recently. As
well as the basic parameters of age and gender, the newer tables include separate mortality tables
for smokers and non-smokers, and the CSO tables include separate tables for preferred classes.[10]
The mortality tables provide a baseline for the cost of insurance, but the health and family
history of the individual applicant is also taken into account (except in the case of Group
policies). This investigation and resulting evaluation is termed underwriting. Health and lifestyle
questions are asked, with certain responses possibly meriting further investigation. Specific
factors that may be considered by underwriters include:

 Personal medical history[11]

 Family medical history[12]
 Driving record[13]
 Height and weight matrix, otherwise known as BMI (Body Mass Index)[14]

Based on the above and additional factors, applicants will be placed into one of several classes of
health ratings which will determine the premium paid in exchange for insurance at that particular
carrier.[15]

General insurance or non-life insurance policies, including automobile and homeowners

policies, provide payments depending on the loss from a particular financial event. General
insurance is typically defined as any insurance that is not determined to be life insurance. It is
called property and casualty insurance in the U.S. and Canada and non-life insurance in
Continental Europe.In the UK, insurance is broadly divided into three areas: personal lines,
commercial lines and London market.The London market insures large commercial risks such as
supermarkets, football players and other very specific risks. It consists of a number of insurers,
reinsurers, P&I Clubs, brokers and other companies that are typically physically located in the
City of London. The Lloyd's of London is a big participant in this market.[1] The London
Market also participates in personal lines and commercial lines, domestic and foreign, through
reinsurance.

Commercial lines products are usually designed for relatively small legal entities. These would
include workers' compensation (employers liability), public liability, product liability,
commercial fleet and other general insurance products sold in a relatively standard fashion to
many organisations. There are many companies that supply comprehensive commercial
insurance packages for a wide range of different industries, including shops, restaurants and
hotels.

Personal lines products are designed to be sold in large quantities. This would include autos
(private car), homeowners (household), pet insurance, creditor insurance and others.

ACORD [2] which is the insurance industry global standards organisation. ACORD has
standards for personal and commercial lines and has been working with the Australian General
Insurers to develop those XML standards, standard applications for insurance, and certificates of
currency.
Types of General Insurance

General insurance can be categorised in to following[3]:

 Motor Insurance : Motor Insurance can be divided into two group, one is car Four wheeler
insurance and other is two wheeler insurance.
 Health Insurance : Common types of health insurance includes, individual health insurance,
family floater health insurance, comprehensive health insurance and critical illnes insurance.
 Travel Insurance : Travel insurance can be broadly grouped into Individual travel policy, Family
Travel policy, student travel insurance and senior citizen health insurance.
 Home Insurance : Home insurance protects house and its contents in bad time.
 Marine Insurance: Marine cargo insurance covers goods, freight, cargo and other interests
against loss or damage during transit by rail, road, sea and/or air.
 Commercial Insurance : Commercial insurance encompasses solutions for all sectors of the
industry arising out of business operations

 General Insurance Types and Features

 Motor Insurance
 You love long drives and speeding on the highways. But have you secured your lovable
ride? Motor insurance, that includes car insurance and two wheeler insurance, covers all
damages and liability to the vehicle. Moreover, according to the Motor Vehicles Act,
1988, driving a motor vehicle without insurance in a public place is a punishable offense.
 A motor vehicle can be covered either by a Liability Only policy which is a statutory
requirement and covers the legal liability for injury, death, and/or property damage
caused to a third party in the event of an accident caused by or arising out of the use of
the vehicle, or a package policy which includes the Liability Only policy and also covers
the damage to owner’s vehicle, usually called O.D. Cover.
 The common motor insurance plans include:
 Car insurance: A comprehensive coverage against physical damage and bodily injury to
the car, and also covers against third-party liability.
 Two wheeler insurance: A comprehensive two-wheeler insurance policy provides
hassle-free protection to your bike or scooter against physical damage, theft and third
party liability.
 Commercial vehicle insurance: Commercial vehicle insurance is a Liability Only policy
for commercial vehicles across the various classes of vehicles like goods carrying
vehicles – private and public carrier, passenger carrying vehicles, miscellaneous and
special types of vehicles.

General Insurance Definition

General insurance covers insurance of property against fire, burglary, theft; personal insurance
covering health, travel and accidents; and liability insurance covering legal liabilities. This
category of insurance virtually covers all forms of insurance except life. Other covers may
include insurance against errors and omissions for professionals, credit insurance etc. Common
forms of general insurance are motor, fire, home, marine, health, travel, accident and other
miscellaneous forms of non-life insurance.Unlike life insurance policies, the tenure of general
insurance policies is normally not that of a lifetime. The usual term lasts for the duration of a
particular economic activity or for a given period of time. Most general insurance products are
annual contracts. There are however, a few products which have a long term.List of General
Insurance Companies in India

Public Sector Private Sector Other General Insurance

1. Agriculture Insurance Co.
of India Ltd.
2. National Insurance Co.
Ltd.
3. The New India Assurance
Co. Ltd.
4. The Oriental Insurance
Co. Ltd.
5. United India Insurance Co.
Ltd.
Companies – Specialised
1. Apollo Munich Health 1. ECGC Ltd. (formerly
Insurance Co. Ltd. Export Credit Guarantee
2. Bajaj Allianz General Corporation of India Ltd.)
Insurance Co. Ltd. 2. General Insurance
3. Bharti AXA General Corporation of India
Insurance Co. Ltd.
4. Cholamandalam MS
General Insurance Co. Ltd.
5. CignaTTK Health Insurance
Co. Ltd.
6. Future Generali India
Insurance Co. Ltd.
7. HDFC ERGO General
Insurance Co. Ltd.
8. ICICI Lombard General
Insurance Co. Ltd.
9. Kotak Mahindra General
Insurance Co. Ltd.
10. L&T General Insurance Co.
Ltd.
11. Magma HDI General
Insurance Co. Ltd.
12. Max Bupa Health
Insurance Co. Ltd.
13. Raheja QBE General
Insurance Co. Ltd.
14. Reliance General
Insurance Co. Ltd.
15. Religare Health Insurance
Co. Ltd.
16. Royal Sundaram Alliance
Insurance Co. Ltd.
17. SBI General Insurance Co.
Ltd.
18. Shriram General Insurance
Co. Ltd.