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Ramalingam Kalirajan |11337 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 02, 2026

Ramalingam Kalirajan has over 26 years of experience in MF distribution and wealth management. He holds an MBA in Finance from the University of Madras and is a CFP (Certified Financial Planner) credentialed professional. He is the Director of Holistic Investment, a Chennai-based AMFI-registered Mutual Fund Distribution (ARN-4188) and APMI-registered PMS Distribution firm (APRN07386), helping clients build long-term wealth through mutual funds and other investment solutions.... more

Asked by Anonymous - Aug 01, 2025Hindi

Respected Gurus, My query is on whether the income generated from ICICI Pru GIFT policy is really TAX free or not. They claim orally that all the benefits from this policy are tax free, but policy document says "as per the prevailing conditions and provisions of the Income Tax Act, 1961" ICICI Pru GIFT (Guaranteed Income For Tomorrow) (Long-term) A Non-Linked Non-Participating Individual Life Insurance Savings Plan Assured Income with 110% ROP Structure of this policy is, Premium is paid for 7 years Risk cover is 10 times premium during premium payment term Guaranteed income is paid from 9th year onwards for 15 years No Risk cover during income payment term On 15th year, will receive 110% of premium along with last income installment Could you please confirm if the yearly income and Return of Premium are really tax free? Thank you.

Ans: You have asked a very important question. Many investors hear the words "tax-free income" during the sales discussion, but the actual answer always depends on the conditions laid down under the Income Tax Act and not on the marketing presentation.

» The Key Point To Check

– The policy document itself has used the words "as per the prevailing conditions and provisions of the Income Tax Act, 1961".

– This means the insurer is not giving an unconditional guarantee that all benefits will remain tax-free forever.

– Tax treatment depends on the tax laws applicable at the time the benefits are received.

– Hence, the policy benefit and tax benefit are two different things.

» Based On The Structure You Have Shared

– Premium is paid for 7 years.

– Life cover is 10 times the annual premium during the premium payment term.

– Guaranteed income starts from the 9th year.

– Income continues for 15 years.

– At the end, 110% of premium is returned along with the last income instalment.

– Since the sum assured appears to be 10 times the annual premium, it generally satisfies one of the important conditions for Section 10(10D) exemption.

» Are The Annual Income Payments Tax-Free?

– In many such traditional life insurance income plans, the annual guaranteed income received under an eligible policy is generally treated as exempt under Section 10(10D), provided the policy satisfies the prescribed conditions.

– If the policy qualifies under Section 10(10D), then the annual income payouts are generally tax-free.

– However, the exact tax treatment should be verified from the benefit illustration and policy schedule because policy-specific wording matters.

» Is The 110% Return Of Premium Tax-Free?

– If the policy qualifies under Section 10(10D), the maturity benefit, including the return of premium component, is generally exempt from tax.

– Therefore, both the periodic income and the final maturity amount may qualify for exemption.

– The fact that the final payment consists partly of return of premium does not automatically make it taxable.

» Important Changes In Recent Years

– Tax laws for life insurance policies have undergone changes for certain high-premium policies.

– The taxation depends on factors such as date of issue, annual premium amount and specific provisions applicable to that category of policy.

– Therefore, one should never assume that every insurance payout is automatically tax-free.

– The policy issue date becomes very important in determining the final tax treatment.

» My Assessment

– Based on the structure you have described, the policy appears to satisfy the traditional 10-times-cover condition.

– Therefore, there is a reasonable possibility that both the annual guaranteed income and the final return of premium may qualify for tax exemption.

– However, I would not rely only on oral statements from the insurer or agent.

– The final answer depends on:

Policy issue date
Annual premium amount
Exact policy schedule
Applicability of Section 10(10D) provisions at the time of receipt

» 360 Degree View

– Tax-free status alone should never be the reason for buying or continuing an investment-cum-insurance policy.

– Equally important are the actual returns generated after considering inflation.

– Compare the long-term wealth creation potential with other available investment avenues.

– If this policy is already purchased, review its projected returns and overall role in your retirement planning.

– If you are still evaluating whether to buy it, request a detailed benefit illustration showing all cash flows before taking a decision.

» Finally

– Based on the information shared, the annual guaranteed income and the 110% return of premium are likely to be tax-free if the policy satisfies the applicable conditions of Section 10(10D).

– But I would strongly suggest obtaining a written confirmation from the insurer's tax cell or customer service team rather than depending on oral assurances.

– Keep that written confirmation safely for future reference, especially since the payouts will continue over many years.

Best Regards,

K. Ramalingam, MBA, CFP,

AMFI-Registered MFD – ARN 4188

www.holisticinvestment.in

https://www.linkedin.com/in/ramalingamcfp/

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