How to Show Life Insurance Maturity Amount in ITR?

Read on to know more in detail.

What is a Life Insurance Maturity Amount? 

A life insurance maturity amount is the payout an insurance company provides to the policyholder at the end of the term, as long as no claim has been made. This amount usually includes the total premiums paid, accrued bonuses and other benefits offered under the plan. It can be used to achieve various financial goals, such as purchasing a home, making a significant investment, or planning for retirement. 

Since the tax treatment of this amount depends on specific conditions, it is important to understand the applicable provisions under Indian tax laws. Proper documentation and accurate reporting in your ITR help ensure a smooth tax filing process.

How Is Life Insurance Maturity Taxed?

The taxability of life insurance maturity proceeds is governed by Section 10(10D) of the Income Tax Act, 1961. The key factor in determining whether your maturity amount is exempt from tax lies in the ratio of your premium to the sum assured. If your policy meets the required conditions, the payout is fully tax-free. But if it doesn’t, the entire amount becomes taxable, and you may also see TDS (Tax Deducted at Source) applied by the insurer before the payment reaches you.

Here are the key rules to determine the taxability:

Rule 1: Tax-Free Maturity (Exempt under Section 10(10D))

• If your policy was issued on or after 1 April 2012:

  • The annual premium must not exceed 10% of the sum assured.

• If your policy was issued before 1 April 2012:

  • The annual premium must not exceed 20% of the sum assured.

If these conditions are met, the entire maturity amount is exempt from tax.

Rule 2: Taxable Maturity

• If the premium exceeds the 10% or 20% limit (as applicable),

  • The entire maturity amount becomes taxable under “Income from Other Sources.”

  • You must report it in your ITR and pay tax as per your slab rate.

Rule 3: TDS on Taxable Maturity (Section 194DA)

• If your maturity amount is taxable and exceeds ₹1 lakh,

  • The insurer will deduct 5% TDS on the income part (i.e., maturity amount minus total premiums paid).

The first step is to know whether your maturity proceeds are taxable or exempt before filing your ITR.

You may also like to read about term insurance

Which Sections of the Income Tax Act Apply?

Now that you know the basic tax rules, here are the relevant sections you’ll need to be aware of while preparing your ITR:

• Section 10(10D): For tax exemptions on maturity proceeds.

• Section 56(2): Governs taxable income from non-exempt life insurance proceeds.

• Section 194DA: Applies if TDS is deducted on taxable maturity payouts.

With these provisions in mind, let’s move to the practical steps involved in reporting the maturity amount in your return.

How to Report Life Insurance Maturity Amount in Your ITR?

Correct reporting ensures that your return is processed smoothly and that any tax credits (like TDS) are properly reflected. Here’s how you can do it:

Step 1: Verify TDS details:

Start by reviewing Form 26AS or the Annual Information Statement (AIS) to see if the insurer has deducted any TDS on the payout.

Step 2: Assess tax status:

Confirm whether your policy qualifies for exemption under Section 10(10D). If yes, your maturity proceeds are not taxable.

Step 3: Choose the correct ITR form:

Use ITR-1 if the amount is fully exempt.

Use ITR-2 or ITR-3 if the amount is taxable.

Step 4: Declare under the correct head:

• If taxable, report it under “Income from Other Sources.”

  • If exempt, report it under the “Exempt Income” section and mention Section 10(10D) as the exemption code.

By following these steps, you’ll ensure that your return is accurate and fully compliant.

Documents Required for Reporting Life Insurance Maturity in ITR

Accurate reporting depends on accurate documentation. Keeping the following ready will make the filing process faster and error-free:

• Policy document: To verify sum assured and premium details.

• Insurance maturity statement: Provided by your insurer; shows payout details and TDS, if any.

• Form 26AS / AIS: Confirms whether TDS has been deducted.

• Premium receipts: To prove that your policy qualifies for tax exemption.

• PAN and Aadhaar: Mandatory for e-verification and return filing.

Gather these documents before you start the filing process, especially if TDS has been applied.

Final Thoughts

For policyholders, receiving a maturity payout is a milestone. But to fully benefit from it, you must ensure proper tax reporting. Knowing whether your proceeds are taxable or exempt under Section 10(10D), choosing the right ITR form, and declaring it in the correct section helps avoid delays, penalties, or unwanted notices.

Whether the payout is ₹1 lakh or ₹10 lakh, accurate and honest disclosure in your ITR builds financial credibility and ensures peace of mind during assessment. If you're ever unsure, consult a tax professional to help with complex cases or large payouts.

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