New Delhi: The Central Board of Direct Taxes (CBDT) on Wednesday issued a set of detailed guidelines on the withdrawal of tax benefits on fat insurance policies which was announced in this year’s union budget.
The detailed 17-page guidelines posted on the tax authority’s website explained the changes introduced in the Income Tax Act this year with situations and examples. The guidelines are issued to remove difficulties in giving effect to the provisions introduced this year.
Income Tax Act exempts any income received from an insurance policy including the bonus amount from tax. This year, this provision was modified to exclude insurance policies in which annual premium in any of the previous years was more than ₹500,000. This was made in order to ensure that tax benefits meant for ordinary persons are not cornered by the super rich.
“This provision was introduced to nullify the tax advantage given to investments disguised as insurance policies,” explained Amit Maheshwari, Tax Partner at AKM Global, a tax and consulting firm.
“Since this provision would impact many individuals, especially the rich, CBDT has issued guidelines to remove difficulties, which is a welcome move. The guidelines are elaborate and give various examples on the computation of consideration eligible for exemption,” said Maheshwari.
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Updated: 17 Aug 2023, 11:11 AM IST
