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Taxation on ULIP Returns, Maturity & Capital Gains
In summary
Your life insurance maturity amount is usually tax exempted if your policy meets a few premium conditions. If it does not meet them, the proceeds become taxable, and you report them in your ITR. The rule that decides this is Section 11, read with Schedule II, of the Income Tax Act, 2025, which has replaced the earlier Section 10(10D).
- The maturity amount is tax-exempt if your annual premium stays within 10% of the sum assured (20% for policies issued before 1 April 2012).
- For non-ULIP policies issued on or after 1 April 2023, your total annual premium must also stay within Rs. 5 lakh.
- For ULIPs issued on or after 1 February 2021, your total annual premium must stay within Rs. 2.5 lakh.
- If the amount is taxable, you report it under the right income head in your ITR.
TDS of 2% applies on the income portion if taxable proceeds cross Rs. 1 lakh in a year.
Keep your policy document, premium records, maturity statement, Form 26AS and AIS handy when you file.
What is a life insurance maturity amount?
A life insurance maturity amount is the money your insurer pays you when your policy reaches the end of its term. Depending on the plan, it can include the sum assured, accrued bonuses and other benefits.
For many people, this payout funds a big goal like education, retirement or a major purchase.
How much tax you pay on it depends on when the policy was issued, how much premium you pay, and how that premium compares with the sum assured.
What are the taxation rules for life insurance maturity amount?
Here is when your maturity amount stays tax-exempt:
Policy type and issue date | Condition for tax-free maturity |
Policy issued 1 April 2003 to 31 March 2012 | Annual premium within 20% of the sum assured |
Policy issued after 1 April 2012 | Annual premium within 10% of the sum assured |
Non-ULIP policy issued on or after 1 April 2023 | Above condition, plus total annual premium within Rs. 5 lakh |
ULIP issued on or after 1 February 2021 | Above condition, plus total annual premium within Rs. 2.5 lakh |
A few more points help you work out your position:
- If the amount is taxable: The gain on a traditional policy is taxed under Income from Other Sources. A non-exempt ULIP is taxed as capital gains.
- TDS: If your taxable proceeds cross Rs. 1 lakh in a year, the insurer deducts 2% TDS on the income portion, which is the payout minus the premiums you paid. This rate has applied since 1 October 2024.
Death proceeds: The amount your family receives on your death stays fully tax-exempt, whatever the premium.
Tax laws are subject to change. BFL does not provide Tax/Investment advisory services. Please consult your advisors.
How do you report a life insurance maturity amount in ITR?
Steps to follow:
- Check the policy details: Look at the issue date, policy type, premium, and sum assured.
- Work out taxability: See whether your policy meets the exemption conditions above.
- Check Form 26AS and AIS: Confirm whether the insurer reported the payment or deducted any TDS.
- Keep the maturity statement ready: Match the amount received and any TDS with the insurer's records.
- Report exempt proceeds: If the amount is exempt, show it under the exempt-income section.
- Report taxable proceeds: If it is taxable, report it under the income head that fits the payout.
- Verify your return: Check your ITR figures against the policy statement, bank statement, Form 26AS and AIS before you submit.
The right ITR form depends on your overall income, residential status and other income. Do not pick a form just because you received maturity proceeds.
What documents do you need to report maturity in ITR?
- Policy document: To verify the sum assured and premium payment details.
- Form 26AS or AIS: To check TDS deductions and ensure they match the insurer’s records.
- Insurance maturity statement: Provided by the insurer, showing the maturity amount paid and applicable TDS.
- Premium payment receipts: To validate that the premiums paid align with tax exemption criteria.
PAN and Aadhaar: Required for seamless filing and verification.
Ensure all documents are accurate and up-to-date to avoid discrepancies during filing.
Conclusion
How much tax you pay on your life insurance maturity amount depends on your policy type, its issue date, the premium you paid, and the conditions under Section 11 of the Income Tax Act, 2025. Once you check whether the amount is exempt or taxable, confirm any TDS and report it under the right section; filing is simple.
Keeping your policy document, maturity statement, and premium records ready helps you report the amount accurately.
Frequently asked questions
How to show life insurance maturity amount in ITR
Is life insurance maturity amount taxable in India?
It depends on whether your policy meets the exemption conditions. If your annual premium stays within 10% of the sum assured (20% for policies issued before 1 April 2012), the maturity amount is tax-exempt. If it goes above this limit, or your total premium crosses Rs. 5 lakh for a non-ULIP policy issued on or after 1 April 2023, the proceeds become taxable.
How is Section 11 relevant for life insurance maturity?
Section 11, read with Schedule II of the Income Tax Act, 2025, is the rule that decides whether your maturity proceeds are tax-exempt. It checks your premium against the sum assured and, for newer policies, against the premium limits. If your policy meets these, the proceeds are exempt; if not, they are taxable. It replaced the earlier Section 10(10D).
Can I claim exemptions on life insurance maturity proceeds?
You do not claim it like a deduction. If your proceeds qualify, you simply show them under the exempt-income section of your ITR, and no tax applies. Keep your policy and premium records ready so you can support the exemption if the Income Tax Department asks for them later.
What documents are needed for reporting maturity in ITR?
Keep your policy document, the insurer's maturity statement, and your premium payment records to confirm the exemption conditions. You also need Form 26AS and AIS to check any TDS, a bank statement to confirm the credit, and your PAN. Having these ready helps you report the amount correctly and avoid mismatches with the insurer's records.
Can the maturity amount of a lapsed policy be reported in ITR?
Yes. You should still report any amount you receive from a lapsed or discontinued policy. Its taxability depends on the type of payout and the policy terms, and a lapsed policy may not be treated the same as one that reaches maturity. Check the insurer's statement and the tax rules before you report it.
Where can I show life insurance maturity amount in ITR?
If the maturity amount is exempt, report it under the Exempt Income section of your ITR under the applicable exemption category. If it is taxable, report it under the relevant income head based on the policy and applicable tax treatment. Check your Form 26AS or applicable tax statement for any TDS before filing.
Is the maturity amount subject to TDS?
Yes, TDS may apply to taxable life insurance proceeds when the applicable threshold is met. For payments governed by the earlier provisions, Section 194DA provides for TDS on the income component; for payments from 1 April 2026, the corresponding provisions of the Income Tax Act, 2025 apply. The TDS rates and monetary thresholds have been retained during the transition.
How to calculate income tax on LIC maturity amount?
First check whether the maturity amount is exempt under the applicable tax rules. If it is taxable, the taxable amount and applicable income head depend on the type of policy and the relevant provisions. Check the maturity statement and premium records before calculating the tax.
Can we show Section 10(10D) exemption under the new tax regime?
Yes. Eligible life insurance maturity proceeds can be exempt even if you choose the new tax regime, provided the policy meets the applicable conditions. For Tax Year 2026-27 onwards, the Income Tax Act, 2025 applies, and the exemption is covered through Section 11 read with Schedule II, which replaces the earlier Section 10(10D) framework. For earlier tax years, Section 10(10D) under the Income Tax Act, 1961 continues to apply.
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#Above illustration is for Bajaj Life Goal Assure IV is A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01) considering Male aged 25 years | Standard Life | Policy term (PT) - 20 years | Premium Payment Term (PPT) - 20 years | Total premiums paid Rs. 7,20,000 | Monthly Premium Payment Mode | Sum Assured Rs. 3,60,000 | Incase of unfortunate death during the 8th policy year, death benefit payable at 4% and 8% will be Rs. 3,60,000. This illustration is considering investment in "Pure Stock Fund - ULIF02721/07/06PURESTKFUN116” through Investor Selectable Portfolio Strategy and Goods & Service Tax (GST) of 18%.
Assumed investment returns on 20th Policy Year
CAGR*
₹14,50,242 - 8%*
₹ 9,46,134 - 4%*
The assumed rate of returns indicated at 4% and 8% are illustrative and not guaranteed and do not indicate the upper or lower limits of returns under the policy.