Dear Sir , I secured 605002 (CRL rank) in JEE Mains . He is getting VIT BHOPAL CSE(AIML). But, being a resident of Odisha , are there any chances of mine in the premier colleges like VSSUT Burla Or CET BHUBANESWAR. Sir also suggest which branch would be best according to the current market scenario and has good future scope??

Ans: Let’s now re-assess the taxability of the maturity amount from your SBI Life Smart Wealth Builder Policy, assuming the annual premium is Rs 40,000, not Rs 4,000.

? Taxability Depends on Section 10(10D) Conditions

– Life insurance policy maturity proceeds are exempt under Section 10(10D) if conditions are met.

– One main condition: Annual premium must be less than 10% of sum assured (if policy issued after 1-Apr-2012).

– You mentioned annual premium is Rs 40,000. Now check the sum assured in your policy.

– If the sum assured is at least Rs 4,00,000 or more, then 10(10D) exemption applies.

– In that case, entire maturity amount will be tax-free, no tax to be paid.

? When Tax Becomes Applicable

– If the premium exceeds 10% of the sum assured, then 10(10D) exemption is lost.

– The entire maturity amount becomes taxable under "Income from Other Sources".

– However, death benefit is always tax-free.

– Also note: From FY 2023-24, high premium policies (total annual premium above Rs 5 lakh) have additional tax rules.

– But your premium is only Rs 40,000, so these new rules will not apply.

? If 10(10D) Exemption Is Lost, Then

– You have to pay tax on maturity proceeds as per your income slab.

– Only the amount received above the total premiums paid will be treated as taxable.

– For example, if you receive Rs 3 lakh maturity and you paid total Rs 2.4 lakh premiums (over 6 years), then Rs 60,000 is taxable.

– Tax rate will be as per your applicable income tax slab.

? TDS Rules to Remember

– If the maturity amount is taxable, TDS at 5% will be deducted on income portion only.

– If you submit Form 15G/15H (and eligible), you may avoid TDS.

– But still, you will have to show the income in your ITR and pay tax as needed.

? What You Can Do Now

– Check your policy document or online account for exact sum assured.

– If sum assured is 10 times or more of annual premium (Rs 40,000), then you’re safe.

– The maturity amount will be tax-free under Section 10(10D).

– If not, calculate the taxable portion and plan to declare it in your ITR.

– Consider consulting a Certified Financial Planner for accurate reporting and reinvestment advice.

? Final Insights

– With Rs 40,000 premium, you’re likely within the tax-free zone if sum assured is Rs 4 lakh or more.

– New taxation rules on insurance do not affect you unless total annual premiums exceed Rs 5 lakh, which they don’t.

– Always keep maturity documents, premium payment proofs and policy details handy at tax filing time.

– For better long-term growth and tax efficiency, consider future investments in mutual funds through MFDs with CFP credential instead of insurance-linked investments.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment