This educational video has been made keeping in view the lack of awareness with regard to the application of provisions of section 10(10D) of the Income-tax Act on the amount received under Central Government Employees Group Insurance scheme and similar schemes of state government employees at the time of retirement. The income described under the clauses of section 10 of the Income-tax Act are not included in total income for the purpose of computation of income under the Act.
As per clause (10D) of section 10 “any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy” is exempt from income-tax. However, the amount received under a health insurance policy referred in sub-section (3) of Section 80DD or sub-section (3) of section 80DDA; or an amount received under a Keyman insurance policy is not exempt. Further, the amount received under the life insurance policies described below is also not exempt from income-tax: -
an insurance policy issued between 1/04/2003 to 31/03/2012 in respect of which the premium payable for any of the years during the term of the policy exceeds 25% of the actual capital sum assured; or
an insurance policy issued on or after 1/04/2012 in respect of which the premium payable for any of the years during the term of the policy exceeds 10% of the actual capital sum assured.
The Central Government Employees Group Insurance Scheme-1980 under which the amount received by the employees of the government at the time of retirement, or the family member, in the case of death of employee during his service tenure is framed by the Central Government with intention to provide insurance cover to its employees under self-financing basis to provide twin benefit as provided under other life insurance policies. A plain reading of the scheme and objective therein makes it clear that the amount received under the scheme is an amount received under a life insurance policy, hence, section 10(10D) is squarely applicable. The group insurance does not come under any of the exceptions provided under the provisions of section 10(10D). Same is the case with the amount received by the employees of State Governments in similar scheme framed by the applicable State government.
