Section 11 (old 10(10D)): When Insurance Maturity/Death Proceeds Are Exempt

Death proceeds are always tax-free. Maturity proceeds are conditional. The 10% of sum assured rule links Sec 11 with Schedule II, Income-tax Act 2025 (old Sec 10(10D)) exemption to the same condition as Sec 123 (old Sec 80C). Finance Act 2021 added a new condition specifically for ULIPs, aggregate premium above ₹2.5L/year makes ULIP maturity taxable. Know what you hold.

Four scenarios, which applies to you: (1) Term insurance: death claim → fully exempt, always. No maturity (pure risk). (2) Endowment/money-back, premium ≤ 10% of SA: maturity exempt under Sec 11 with Schedule II (old Sec 10(10D)). (3) Endowment, premium > 10% of SA: maturity taxable, insurer deducts 5% TDS. (4) ULIP, aggregate premium ≤ ₹2.5L: maturity exempt. (5) ULIP, aggregate > ₹2.5L: taxable as capital gains (equity LTCG/STCG rates). ULIP > ₹2.5L, the Finance Act 2021 trap: You have 3 ULIPs: HDFC Click 2 Invest ₹1L/year, ICICI iProtect Smart ₹1L/year, Max Life wealth plan ₹80K/year. Total: ₹2.8L > ₹2.5L. ALL ULIPs' maturity is now taxable (the excess itself is taxable if any single ULIP is "above threshold" after sorting). Tax on maturity: if equity fund within ULIP, taxed as equity capital gains (12.5% LTCG above ₹1.25L). Many investors with multiple ULIPs don't realise this.