Budget 2025: Tax free maturity proceeds for all ULIPs, money-back and other insurance policies only if non-residents buys it from IFSC by following this condition

Unlimited tax exemption on ULIP returns for non residents if it is bought from this intermediary office: Budget 2025

Budget 2025 has given significant tax relief to Non-Residents (NRs) who may wish to purchase any insurance policy including ULIPs from a company registered in the IFSC region. Now all insurance policies purchased from an IFSC registered office of the insurer will get section 10(10D) tax exemption irrespective of the fact its premium payable is more than Rs 2.5 lakh for ULIPs and Rs 5 lakh for others. This amendment is applicable from April 1, 2025.

Budget with ET

Tax calculator

Although it may look like a total tax exemption, but there is a catch which is that the Finance Minister has inserted a limitation clause without which this tax exemption for insurance policies bought from the IFSC region won’t be given.

IFSC which stands for International Financial Services Centre (IFSC) is presently situated in Gandhinagar, Gujarat. Companies which set up their registered office in this region get tax and other benefits.

Benefit given to insurance policy buyers from IFSC region in Budget 2025

The Income Tax Department in its frequently asked question about Budget 2025 said: “Clause (10D) of section 10 is proposed to be amended so as to provide that proceed received on life insurance policy, issued by insurance intermediary office located in IFSC, shall be exempted without any condition on premium amount (i.e. Rs 2,50,000 for ULIPs and Rs 5,00,000 for other policies). However, the premium payable for any of the year during the term of policy should not be more than 10 percent of the actual capital sum assured.”

The limitation clause as can be seen from the above proposal by the Finance Minister is on the basis of the percentage of the insurance premium paid for such a policy. If the annual premium payable for this policy is more than 10% of the actual capital sum assured, then this tax exemption will not be given for IFSC bought insurance policies including ULIPs.
Growfast
  • Java Programming with ChatGPT: Learn using Generative AI

    Artificial Intelligence(AI)

    Java Programming with ChatGPT: Learn using Generative AI

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Basics of Generative AI: Unveiling Tomorrows Innovations

    Artificial Intelligence(AI)

    Basics of Generative AI: Unveiling Tomorrows Innovations

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Generative AI for Dynamic Java Web Applications with ChatGPT

    Artificial Intelligence(AI)

    Generative AI for Dynamic Java Web Applications with ChatGPT

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Mastering C++ Fundamentals with Generative AI: A Hands-On

    Artificial Intelligence(AI)

    Mastering C++ Fundamentals with Generative AI: A Hands-On

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Master in Python Language Quickly Using the ChatGPT Open AI

    Artificial Intelligence(AI)

    Master in Python Language Quickly Using the ChatGPT Open AI

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Performance Marketing for eCommerce Brands

    Marketing

    Performance Marketing for eCommerce Brands

    By - Zafer Mukeri, Founder- Inara Marketers

  • Zero to Hero in Microsoft Excel: Complete Excel guide 2024

    Office Productivity

    Zero to Hero in Microsoft Excel: Complete Excel guide 2024

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • A2Z Of Money

    Finance

    A2Z Of Money

    By - elearnmarkets, Financial Education by StockEdge

  • Modern Marketing Masterclass by Seth Godin

    Marketing

    Modern Marketing Masterclass by Seth Godin

    By - Seth Godin, Former dot com Business Executive and Best Selling Author

  • Vastu Shastra Course

    Astrology

    Vastu Shastra Course

    By - Sachenkumar Rai, Vastu Shashtri

  • Succession Planning Masterclass

    Strategy

    Succession Planning Masterclass

    By - Nigel Penny, Global Strategy Advisor: NSP Strategy Facilitation Ltd.

  • SQL for Data Science along with Data Analytics and Data Visualization

    Data Science

    SQL for Data Science along with Data Analytics and Data Visualization

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • AI and Analytics based Business Strategy

    Artificial Intelligence(AI)

    AI and Analytics based Business Strategy

    By - Tanusree De, Managing Director- Accenture Technology Lead, Trustworthy AI Center of Excellence: ATCI

  • A Comprehensive ASP.NET Core MVC 6 Project Guide for 2024

    Web Development

    A Comprehensive ASP.NET Core MVC 6 Project Guide for 2024

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Digital Marketing Masterclass by Pam Moore

    Marketing

    Digital Marketing Masterclass by Pam Moore

    By - Pam Moore, Digital Transformation and Social Media Expert

  • AI-Powered Python Mastery with Tabnine: Boost Your Coding Skills

    Artificial Intelligence(AI)

    AI-Powered Python Mastery with Tabnine: Boost Your Coding Skills

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Mastering Microsoft Office: Word, Excel, PowerPoint, and 365

    Office Productivity

    Mastering Microsoft Office: Word, Excel, PowerPoint, and 365

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Digital marketing - Wordpress Website Development

    Marketing

    Digital marketing - Wordpress Website Development

    By - Shraddha Somani, Digital Marketing Trainer, Consultant, Strategiest and Subject Matter expert

  • Mastering Google Sheets: Unleash the Power of Excel and Advance Analysis

    Office Productivity

    Mastering Google Sheets: Unleash the Power of Excel and Advance Analysis

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Mastering Full Stack Development: From Frontend to Backend Excellence

    Web Development

    Mastering Full Stack Development: From Frontend to Backend Excellence

    By - Metla Sudha Sekhar, IT Specialist and Developer

  • Financial Literacy i.e Lets Crack the Billionaire Code

    Finance

    Financial Literacy i.e Lets Crack the Billionaire Code

    By - CA Rahul Gupta, CA with 10+ years of experience and Accounting Educator

  • SQL Server Bootcamp 2024: Transform from Beginner to Pro

    Data Science

    SQL Server Bootcamp 2024: Transform from Beginner to Pro

    By - Metla Sudha Sekhar, IT Specialist and Developer


    Here’s a table explaining it:
    Policy typePremium per yearActual capital sum assuredSection 10 (10D) tax exemption
    ULIPRs 30 lakhRs 2 lakhYes
    Other insurance policiesRs 60 lakhRs 5 lakhYes
    ULIPRs 30 lakhRs 4 lakhNo
    Other insurance policiesRs 60 lakhRs 8 lakhNo

    Experts say this enhancement of the tax exemption criteria under section 10(10D) specifically for policies issued from the IFSC region aims to bolster the attractiveness of IFSC as a center for financial services.

    Sonal Alagh, Partner, Alagh & Kapoor Law Offices, says, “The significant aspect of this amendment is the removal of the cap on premium amounts which were previously set at Rs 2,50,000 for ULIPs and Rs 5,00,000 for other life insurance policies to qualify for tax exemption. Now, the only condition is that the premium for any year during the term of the policy should not exceed 10 percent of the sum assured.

    Chartered Accountant Prakash Hegde says, "NRIs are allowed to purchase life insurance policies and Unit Linked Insurance Policies from an Insurance Intermediary Office located in IFSC and they can get benefit from the above tax exemption."

    Hegde adds: The Indian Government has set up IFSC to undertake financial services transactions that are carried on outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions. IFSC as envisaged under the Indian context “is a jurisdiction that provides financial services to non-residents and residents (Institutions), in foreign currency other than Indian Rupee (INR). To encourage IFSC, the Indian Government has implemented many regulations and also provided many tax exemptions to units in the IFSC and the investors."

    Explanatory memorandum to Budget 2025 said this about IFSC insurance policies


    The explanatory memorandum to Budget 2025 said: “In order to provide parity to non-residents availing life insurance from insurance office in IFSC vis a vis other foreign jurisdiction, it is proposed to amend the clause (10D) of section 10 so as to provide that proceeds received on life insurance policy issued by IFSC insurance intermediary office shall be exempted without the condition related to the maximum premium payable on such policy as mentioned above.”

    As seen from the explanatory memorandum to Budget 2025, experts say the above income tax exemption is directed only towards non-residents and not Indian residents.

    Pranjita Barman, Partner, Cyril Amarchand Mangaldas, says, “While the proposed amendments to the Income Tax Act do not clarify whether it will be applicable to residents, non-residents or both, the memorandum to the speech of the finance minister indicates that such an amendment was introduced to ensure parity for non-residents vis-à-vis other offshore jurisdictions. Accordingly, the intent seems to limit the exemptions to non-residents.”

    For Indian residents, Budget 2025 has clarified that if a ULIP or other insurance policy do not satisfy Section 10 (10D) provisions about maximum premium paid being Rs 2.5 lakh (ULIP), Rs 5 lakh (others) and premium amount limited to 10% of the sum assured, then it will be taxed as capital gains. Read more about it here.

    Barman adds: “The memorandum to the budget speech provides that all life insurance policies issued by an IFSC insurance office to non-residents will be free of Section 10 (10D) exemption conditions such has premium limits. It includes all life insurance policies including ULIPs and endowments. Proceeds received out of health insurance policies are never treated as income since they are in the form of reimbursement of expenses incurred and therefore are anyway not taxable, within or outside IFSC.”

    "As a continuation of the tax exemptions, in the Finance Bill presented on 01 February 2025, it has been proposed to allow exemption for gains from ULIPs even if the total premium for the whole year exceeds Rs 2,50,000 and for gains from other life insurance policies (other than ULIPs) even if the total premiums for the whole year exceeds Rs 5,00,000 in case such policies are issued by the IFSC insurance intermediary office. [However, such gains will continue be taxable if the limit on premium i.e. 10% of sum assured, is not adhered to]," says Hegde.

    Who is eligible to register as an IFSC insurance intermediary office?

    According to a FAQ by IFSC the following entities are eligible:
    1. An intermediary or insurance intermediary registered with the Insurance Regulatory and Development Authority of India (IRDAI);
    2. A foreign insurance intermediary registered with home country regulatory or supervisory authority;
    3. An Indian company incorporated under the Companies Act, 2013, or a firm or a co-operative society; or
    4. A body corporate incorporated under the laws of any country outside India.

    This story originally appeared on: India Times - Author:Faqs of Insurances