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Date: 16-Aug-2023 Category: Extra Ordinary State: Union Government Country: India

notification under section 10(10D) of the Income tax act 1961

Issued by Ministry of Finance · Department of Revenue

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Executive Summary & Key Takeaways

What it means

  • The notification introduces Rule 11UACA to the Income-tax Rules, 1962, providing a formula for computing income chargeable to tax under Section 56(2)(xiii) of the Income-tax Act, 1961. This section pertains to income from life insurance policies that are not exempt under Section 10(10D).

Key Changes

  • A new rule, 11UACA, is inserted into the Income-tax Rules, 1962.
  • The rule provides a formula to calculate taxable income from life insurance policies, specifically those not exempt under Section 10(10D) of the Income-tax Act, 1961.
  • The formula distinguishes between the first year a sum is received under the policy and subsequent years.
  • For the first year (First Previous Year), the taxable income is calculated as A-B, where A is the sum received and B is the aggregate premium paid till the date of receipt, excluding premiums already claimed as deductions.
  • For subsequent years (Subsequent Previous Year), the taxable income is calculated as C-D, where C is the sum received and D is the aggregate premium paid till the date of receipt, excluding premiums already claimed as deductions or included in the calculation for previous years.
  • The notification clarifies that the sum received under a life insurance policy includes any amount received, regardless of its name, that is not excluded from total income under Section 10(10D), excluding amounts received under unit-linked insurance policies or income specified in Section 56(2)(iv).

Impact Analysis

Impact on Individuals Receiving Life Insurance Payouts

  • Action Item: Individuals should consult with tax advisors to understand the implications of this rule on their specific life insurance policies and payout scenarios.

Impact on Insurance Companies

  • Action Item: Insurance companies should review their policy documentation and communication strategies to ensure policyholders are aware of the tax implications of their policies.

Impact on Tax Authorities

  • Action Item: CBDT should issue clarifications and guidance on the implementation of Rule 11UACA.

Key Entities Referenced

Central Board of Direct Taxes (CBDT): The issuing authority for the notification, responsible for making rules to amend the Income-tax Rules, 1962. Income-tax Act, 1961: The principal legislation governing income tax in India. Section 56(2)(xiii) deals with income from other sources, including certain life insurance policies. Income-tax Rules, 1962: The set of rules framed under the Income-tax Act, 1961, providing detailed procedures and guidelines for the implementation of the Act. Rule 11UACA is inserted into these rules. Section 10(10D) of the Income-tax Act, 1961: This section provides an exemption for certain sums received under a life insurance policy, subject to certain conditions. The new rule applies to policies that do not qualify for this exemption.
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रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99 सी.जी.-डी.एल.-अ.-16082023-248134 xxxGIDHxxx CG-DL-E-16082023-248134 xxxGIDExxx असाधारण EXTRAORDINARY भाग II—खण् ड 3—उप-खण्ड (i) PART II—Section 3—Sub-section (i) प्राजधकार स ेप्रकाजित PUBLISHED BY AUTHORITY स.ं 474] नई दिल्ली, बुधिार, अगस्ट्त , 16, 2023/श्रािण 25, 1945 No. 474] NEW DELHI, WEDNESDAY, AUGUST, 16, 2023/SHRAVANA 25, 1945 जित्त मत्रं ालय (रािस्ट्ि जिभाग) (केंद्रीय प्रत्यक्ष कर बोडड) अजधसचू ना नई दिल्ली, 16 अगस्ट्त, 2023 सा.का.जन. 604(अ).—केंद्रीय प्रत्यक्ष कर बोड,ड आय-कर अजधजनयम, 1961 (1961 का 43) की धारा 295 के साथ पठित धारा 56 की उपधारा (2) के खंड (xiii) द्वारा प्रित्त िजियों का प्रयोग करते हुए, आय-कर जनयम, 1962 का और संिोधन करन े के जलए जनम्नजलजखत जनयम बनाता ह,ै अथाडत्:- 1. संजक्षप्त नाम और प्रारंभ - (1) इन जनयमों का संजक्षप्त नाम आय-कर संिोधन (सोलहिां सिं ोधन) जनयम, 2023 ह ै। (2) य ेरािपत्र में इनके प्रकािन की तारीख को प्रिृत्त होंगे । 2. आय-कर जनयम, 1962 के जनयम 11पकग के पश्चात,् जनम्नजलजखत जनयम अतं ःस्ट्थाजपत दकया िाएगा, अथाडत:् - “11पकगक धारा 56 की उपधारा 2 के खडं (xiii) के अधीन कर स े प्रभायड आय की सगं णना-धारा 56 की उपधारा 2 के खंड (xiii) के प्रयोिन के जलए, िहां कोई व्यजि दकसी िीिन बीमा पाजलसी के अधीन दकसी पूिड िर्ड के िौरान दकसी समय पर कोई राजि प्राप्त करता ह,ै तो उस पूिड िर्ड के िौरान, जिसमें ऐसी राजि प्राप्त की गई ह,ै उि खंड के अधीन कर से प्रभायड आय की सगं णना जनम्नजलजखत रीजत म ेंकी िाएगी, अथाडत्:- 5283 GI/2023 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)] (i) िहां पूि ड िर् ड (जिसे इसमें इसके पश्चात ् पहला पूिड िर् ड कहा गया ह)ै के िौरान िीिन बीमा पाजलसी के अधीन पहली बार कोई राजि प्राप्त की गई ह,ै तो पहल े पूि ड िर्ड म ें कर स े प्रभाय ड आय की संगणना जनम्नजलजखत गुणसूत्र के अनुसार की िाएगी,- क-ख िहां,- क= पहले पूि ड िर्ड के िौरान िीिन बीमा पाजलसी के अधीन प्राप्त की गई राजि या कुल राजि; और ख= पहल े पूिड िर्ड म ें राजि की प्राजप्त की तारीख तक िीिन बीमा पाजलसी की अिजध के िौरान संित्त कुल प्रीजमयम, जिसका अजधजनयम के दकसी अन्य उपबंध के अधीन कटौती के रुप म ेंिािा नहीं दकया गया ह;ै (ii) िहा ं पहल े पूि ड िर् ड के पश्चातिती पूि ड िर् ड (जिसे इसम ें इसके पश्चात ् पश्चातिती पूि ड िर् ड कहा गया ह)ै के िौरान िीिन बीमा पाजलसी के अधीन कोई राजि प्राप्त की गई ह,ै तो पश्चातिती पूि ड िर्ड म ें कर स े प्रभायड आय की सगं णना जनम्नजलजखत गणु सूत्र के अनुसार की िाएगी,- ग-घ िहां,- ग= पश्चातिती पूिड िर् ड के िौरान िीिन बीमा पाजलसी के अधीन प्राप्त की गई राजि या कुल राजि; और घ= पश्चातिती पूिड िर् ड म ें राजि की प्राजप्त की तारीख तक िीिन बीमा पाजलसी की अिजध के िौरान संित्त कुल प्रीजमयम, िो ऐसा प्रीजमयम नहीं ह ैजिसका- (क) अजधजनयम के दकसी अन्य उपबधं के अधीन कटौती के रुप म ेंिािा दकया गया ह;ै या (ख) दकन्ही पूिड िर्ड या िर्ों में से दकसी में इस जनयम की रकम 'ख' या रकम 'घ' में सजममजलत दकया गया ह ै। स्ट्पष्टीकरणः- िंकाओं को िरू करने के जलए, यह स्ट्पष्ट दकया िाता ह ै दक दकसी िीिन बीमा पाजलसी के अधीन प्राप्त की गई दकसी राजि से दकसी ऐसी रकम, चाह ेदकसी भी नाम स ेज्ञात हो, अजभप्रेत ह ैिो, - (क) बीमा पाजलसी से सहबद्ध दकसी इकाई के अधीन प्राप्त ; या (ख) धारा 56 की उपधारा(2) के खंड (4) में जनर्िष्टड आय ; की राजि से जभन्न, ऐसी पाजलसी के अधीन प्राप्त की गई ह ै जिसे धारा 10 के खंड(10घ) के उपबंधों के अनुसार पूिड िर् ड की कुल आय से अपिर्िडत नहीं दकया िाना ह।ै "। [अजधसूचना सं. 61/2023/फा.सं.370142/28/2023-टीपीएल] सौरभ िैन, अिर सजचि ठटप्पण : मूल जनयम भारत के रािपत्र, असाधारण, भाग II, खंड 3, उपखडं (ii) में अजधसचू ना संख्या का.आ.969(अ), तारीख 26 माचड, 1962 द्वारा प्रकाजित दकए गए थ े और सिं ोधन अजधसूचना संख्या सा.का.जन. 595(अ), तारीख 9अगस्ट्त, 2023 द्वारा अंजतम बार संिोजधत दकए गए थे । MINISTRY OF FINANCE (Department Of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 16th August, 2023 G.S.R. 604(E).—In exercise of the powers conferred by clause (xiii) of sub-section (2) of section 56, read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:─ 1. Short title and commencement: - (1) These rules may be called the Income tax Amendment (Sixteenth Amendment), Rules, 2023.[भाग II—खण् ड 3(i)] भारत का रािपत्र : असाधारण 3 (2) They shall come into force on the date of their publication in the Official Gazette. 2. In the Income-tax Rules, 1962, after rule 11UAC, the following rules shall be inserted, namely:— “11UACA Computation of income chargeable to tax under clause (xiii) of sub-section (2) of section 56. - For the purpose of clause (xiii) of sub-section (2) of section 56, where any person receives at any time during any previous year any sum under a life insurance policy, then, the income chargeable to tax under the said clause during the previous year in which such sum is received shall be computed in the following manner, namely: — (i) where the sum is received for the first time under the life insurance policy during the previous year (hereinafter referred to as first previous year), the income chargeable to tax in the first previous year shall be computed in accordance with the formula,— A-B where, - A = the sum or aggregate of sum received under the life insurance policy during the first previous year; and B = the aggregate of the premium paid during the term of the life insurance policy till the date of receipt of the sum in the first previous year that has not been claimed as deduction under any other provision of the Act; (ii) where the sum is received under the life insurance policy during the previous year subsequent to the first previous year (hereinafter referred to as subsequent previous year), the income chargeable to tax in the subsequent previous year shall be computed in accordance to the formula,— C-D where, - C = the sum or aggregate of sum received under the life insurance policy during the subsequent previous year; and D = the aggregate of the premium paid during the term of the life insurance policy till the date of receipt of the sum in the subsequent previous year not being premium which – (a) has been claimed as deduction under any other provision of the Act; or (b) is included in amount ‘B’ or amount ‘D’ of this rule in any of the previous year or years Explanation .– For the removal of doubts, it is clarified that the sum received under a life insurance policy would mean any amount, by whatever name called, received under such policy which is not to be excluded from the total income of the previous year in accordance with the provisions of clause (10D) of section 10, other than the sum– (a) received under a unit linked insurance policy; or (b) being the income referred to in clause (iv) of sub-section (2) of section 56.”. [Notification No. 61/2023/ F.No.370142/28/2023-TPL] SOURABH JAIN, Under Secy. Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide notification number S.O. 969(E), dated the 26th March, 1962 and was last amended vide notification number G.S.R. 595 (E) dated 9th August, 2023. Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.

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