Circular No. 2 of 2022

F. No.370142 /61/2021-TPL

Government of India
Ministry of Finance

Department of Revenue
(Central Board of Direct Taxes)

***********

Dated: 19th January, 2022

Sub: Guidelines under clause (10D) section 10 of the Income-tax Act, 1961 - reg.

Clause (10D) of section 10 of the Income-tax Act, 1961 (the Act) provides for
income-tax exemption on the sum received under a life insurance policy, including any sum
allocated by way of bonus on such policy subject to certain exclusions.

2. The Finance Act, 2021 amended clause (10D) of section 10 of the Act by inserting
fourth to seventh provisos. Fourth proviso provides that, with effect from 01.02.2021, the
sum received under a Unit Linked Insurance Policy (ULIP), issued on or after 01.02.2021,
shall not be exempt under the said clause if the amount of premium payable for any of the
previous years during the term of such policy exceeds Rs 2,50,000. Further, fifth proviso
provides that if premium is payable for more than one ULIP, issued on or after 01.02.2021,
the exemption under the said clause shall be available only with respect to such policies
where the aggregate premium does not exceed Rs 2,50,000 for any of the previous years
during the term of any of those policies. Sixth proviso provides that the fourth and fifth
provisos shall not apply in case of sum received on death of the person.

3. Seventh proviso to the said clause (10D) also empowers the Central Board of Direct
Taxes (Board) to issue guidelines, with the previous approval of the Central Government, in
order to remove any difficulty which arises while giving effect to the provisions of the said
clause. In exercise of the powers under this proviso, Board, with the previous approval of the
Central Government, hereby issues the following guidelines.

4. Sum received including any sum allocated by way of bonus (hereinafter referred as
“consideration”) during the previous year (hereinafter referred as “current previous year”)
under any one or more ULIPs issued on or after 01.02.2021 (hereinafter referred as “eligible
ULIP”) shall be exempt under clause (10D) of section 10 of the Act, subject to the

1
Circular No. 2 of 2022
satisfaction of other provisions of said clause. The same are explained by way of examples of
different situations:-

4.1 Situation1: No consideration is received by the assessee on any eligible ULIPs during
any previous year preceding the current previous year or consideration has been received on
such eligible ULIPs but has not been claimed exempt. The exemption under clause (10D) of
section 10 of the Act shall be determined as under:

i. If the assessee has received consideration, during the current previous year, under one
eligible ULIP only and the amount of premium payable on such eligible ULIP does
not exceed Rs 2,50,000 for any of the previous years during the term of such eligible
ULIP, such consideration shall be eligible for exemption under the said clause (10D);

ii. If the assessee has received consideration, during the current previous year, under one
eligible ULIP only and the amount of premium payable on such eligible ULIP
exceeds Rs 2,50,000 for any of the previous years during the term of such eligible
ULIP, such consideration shall not be eligible for exemption under the said clause
(10D);

iii. If the assessee has received consideration, during the current previous year, under
more than one eligible ULIPs and the aggregate of the amount of premium payable on
such eligible ULIPs does not exceed Rs 2,50,000 for any of the previous years during
the term of such eligible ULIPs, such consideration shall be eligible for exemption
under the said clause (10D);

iv. If the assessee has received consideration, during the current previous year, under
more than one eligible ULIPs and the aggregate of the amount of premium payable on
such eligible ULIPs exceeds Rs 2,50,000 for any of the previous years during the term
of such eligible ULIPs, the consideration under only such eligible ULIPs shall be
eligible for exemption under the said clause (10D) where aggregate of the amount of
the premium payable does not exceed Rs 2,50,000 for any of the previous years
during their term (Refer Examples).

4. 2 Situation 2: Consideration has been received by the assessee under any one or more
eligible ULIPs during any previous year preceding the current previous year and it has been
claimed to be exempt under clause (10D) of section 10 of the Act. Such eligible ULIPs are
referred as “Old ULIPs” in this paragraph and corresponding examples and reference to

2
Circular No. 2 of 2022
eligible ULIPs shall not include old ULIPs. The exemption under clause (10D) of section 10
of the Act shall be determined as under:

i. If the assessee has received consideration, during the current previous year, under
one eligible ULIP only and aggregate amount of premium payable on such eligible
ULIP and old ULIPs does not exceed Rs 2,50,000 for any of the previous year
during the term of such eligible ULIP, the consideration under such eligible ULIP
shall be eligible for exemption under the said clause (10D);

ii. If the assessee has received consideration, during the current previous year, under
one eligible ULIP only and aggregate amount of premium payable on such eligible
ULIP and old ULIPs exceeds Rs 2,50,000 for any of the previous year during the
term of such eligible ULIP, the consideration under such eligible ULIP shall not be
eligible for exemption under the said clause (10D);

iii. If the assessee has received consideration, during the current previous year, under
more than one eligible ULIPs and aggregate of the amount of premium payable on
such eligible ULIPs and old ULIPs does not exceeds Rs 2,50,000 for any of the
previous year during the term of such eligible ULIPs, such consideration shall be
eligible for exemption under the said clause (10D);

iv. If the assessee has received consideration, during the current previous year, under
more than one eligible ULIPs and aggregate of the amount of premium payable on
such eligible ULIPs and old ULIPs exceeds Rs 2,50,000 for any of the previous year
during the term of such eligible ULIPs, consideration under only such eligible
ULIPs shall be eligible for exemption under the said clause (10D) where aggregate
amount of premium along with the aggregate amount of premium of old ULIPs does
not exceed Rs 2,50,000 for any of the previous year during the term of any of such
eligible ULIPs (refer examples).

4.3 The above guidelines are explained with the help of the following examples:

Example 1:

The assessee has the following policy which satisfies all the conditions laid down in clause
(10D) of section 10 of the Act (other than the conditions provided under the fourth and fifth
proviso of the said clause, applicability whereof is being explained in the example).

3
ULIP Circular No. 2 of 2022
Date of issue
Annual premium (Rs) A
Sum assured (Rs) 01.04.2011
Consideration received as on 01.11.2021 on maturity
5,00,000
50,00,000
60,00,000

Taxability as per fourth proviso to clause (10D) of section 10 of the Act:

The sum received on maturity will be exempt under clause (10D) of section 10 of the Act as
the policy has been issued before 01.02.2021 and accordingly not covered by the 4th to 7th
provisos to the said clause (10) of section 10, inserted by Finance Act, 2021.

Example 2:

The assessee has the following policy which satisfies all the conditions laid down in clause
(10D) of section 10 of the Act (other than the conditions provided under the fourth and fifth
proviso of the said clause, applicability whereof is being explained in the example). The
assesse did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2031-32.

ULIP A
Date of issue 01.04.2021
Annual premium (Rs)
Sum assured (Rs) 5,00,000
Consideration received as on 01.11.2031 on maturity 50,00,000
60,00,000

Taxability as per fourth proviso to clause (10D) of section 10 of the Act:

 The consideration received will not be exempt under clause (10D) as per the
provisions of fourth proviso since the annual premium payable on the policy exceeded
Rs 2,50,000.

Example 3:

The assessee has the following policy which satisfies all the conditions laid down in clause
(10D) of section 10 of the Act (other than the conditions provided under the fourth and fifth

4
Circular No. 2 of 2022
proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2031-32.

ULIP A

Date of issue 01.04.2021
Annual premium (Rs) 2,50,000
Sum assured (Rs) 25,00,000

Consideration received as on 01.11.2031 on maturity 32,00,000

Taxability as per fourth proviso to clause (10D) of section 10 of the Act:

The consideration received will be exempt under clause (10D) as the provisions of fourth
proviso will not apply since the annual premium payable on the policy does not exceed Rs
2,50,000.

Example 4:

The assessee has the following policies all of which satisfy all the conditions laid down in
clause (10D) of section 10 of the Act (other than the conditions provided under the fourth and
fifth proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2031-32.

ULIP A B
Date of issue 01.04.2021 01.04.2021
Annual premium (Rs)
Sum assured (Rs) 2,00,000 3,00,000
Consideration received as on 01.11.2031 on maturity 20,00,000 30,00,000
22,00,000 35,00,000

Taxability as per fifth proviso to clause (10D) of section 10 of the Act:

 The consideration received under ULIP “B” will not be exempt under clause (10D) as
per the provisions of fifth proviso, since aggregate of the annual premium payable for
ULIP “A” and ULIP “B” exceeds Rs 2,50,000 during the term of these policies.
However, the consideration received under ULIP “A” shall be exempt under clause
5
Circular No. 2 of 2022
(10D) since its annual premium does not exceed Rs 2,50,000 in any of the previous
years during the term of the policy.

Example 5:

The assessee has the following policies all of which satisfy all the conditions laid down in
clause (10D) of section 10 of the Act (other than the conditions provided under the fourth and
fifth proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2031-32.

ULIP A B C

Date of issue 01.04.2021 01.04.2021 01.04.2021

Annual premium (Rs) 1,00,000 1,50,000 3,00,000

Sum assured (Rs) 10,00,000 15,00,000 30,00,000
Consideration received as on 01.11.2031 on maturity 12,00,000 18,00,000 34,00,000

Taxability as per fifth proviso to clause (10D) of section 10 of the Act:

 The consideration received under ULIP “C” will not be exempt under clause (10D) as
per the provisions of fifth proviso since aggregate of the annual premium payable for
ULIP “A”, ULIP “B” and ULIP “C’ exceeds Rs 2,50,000 during the term of these
policies.

 However, the consideration received under ULIPs “A” and “B” shall be exempt under
clause (10D), since aggregate of annual premium payable for these two policies does
not exceed Rs 2,50,000 for any previous year during the term of these two policies.

Example 6:

The assessee has the following policies all of which satisfy all the conditions laid down in
clause (10D) of section 10 of the Act (other than the conditions provided under the fourth and
fifth proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2030-31.

6
Circular No. 2 of 2022

ULIP X A B C
Date of issue 01.04.2020 01.04.2021
Annual premium (Rs) 01.04.2021 01.04.2021
Sum assured (Rs) 2,50,000 1,00,000
Consideration received as on 25,00,000 10,00,000 1,50,000 3,00,000
01.11.2030 on maturity 30,00,000
Consideration received as on 12,00,000 15,00,000 30,00,000
01.11.2031 on maturity
18,00,000 34,00,000

Taxability as per fifth proviso to clause (10D) of section 10 of the Act:

 The consideration under ULIP “X” will be exempt under clause (10D) as the policy
has been issued before 01.02.2021 and it is not covered by recently introduced
provisions.

 The consideration received under ULIP “C” will not be exempt under clause (10D) as
per the provisions of fifth proviso since aggregate of the annual premium payable for
ULIP “A”, ULIP “B’ and ULIP “C” exceeds Rs 2,50,000 during the term of these
policies.

 However, the consideration received under ULIPs “A” and “B” shall be exempt under
clause (10D), since aggregate of annual premium payable for these two policies does
not exceed Rs 2,50,000 for any previous year during the term of these two policies.

Example 7:

The assessee has the following policies all of which satisfy all the conditions laid down in
clause (10D) of section 10 of the Act (other than the conditions provided under the fourth and
fifth proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2031-32.

ULIP X A B C
Date of issue 01.04.2021 01.04.2022 01.04.2022 01.04.2022
Annual premium (Rs)
Sum assured (Rs) 2,00,000 1,00,000 1,50,000 3,00,000
20,00,000 10,00,000 15,00,000 30,00,000

7
Circular No. 2 of 2022

Consideration received as on 25,00,000
01.11.2031 on maturity
12,00,000 18,00,000 34,00,000
Consideration received as on
01.11.2032 on maturity

Taxability as per fifth proviso to clause (10D) of section 10 of the Act:

 The consideration under ULIP “X” will be exempt for the previous year 2031-32
under clause (10D) since the annual premium does not exceed Rs 2,50,000.

 The consideration received under ULIPs “A”, “B” and “C” will not be exempt under
clause (10D) as per the provisions of fifth proviso since aggregate of the annual
premium payable for these three ULIPs and ULIP “X” exceeds Rs 2,50,000 for the
previous years 2022-23 to 2031-32 which fall under the tenure of these policies. The
consideration under ULIP “A” will also not be eligible for exemption under the said
clause as the aggregate of annual premium of ULIPs “X” and “A” exceeds Rs
2,50,000.

Example 8:

The assessee has the following policies all of which satisfy all the conditions laid down in
clause (10D) of section 10 of the Act (other than the conditions provided under the fourth and
fifth proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2031-32.

ULIP X A B C

Date of issue 01.04.2021 01.04.2022 01.04.2022 01.04.2022

Annual premium (Rs) 1,00,000 1,00,000 1,50,000 3,00,000
Sum assured (Rs) 10,00,000 10,00,000 15,00,000 30,00,000
12,00,000
Consideration received on maturity as 12,00,000 18,00,000 34,00,000
on 01.11.2031
Consideration received as on
01.11.2032 on maturity

8
Circular No. 2 of 2022
Taxability as per fifth proviso to clause (10D) of section 10 of the Act:

 The consideration under ULIP “X” will be exempt under clause (10D) for the
previous year 2031-32 since the annual premium does not exceed Rs 2,50,000.

 The consideration received under ULIP “B” only will be exempt under clause (10D)
during the previous year 2032-33 while consideration received under ULIPs “A” and
“C” will be taxable as per the provisions of fifth proviso.

 The exemption is restricted to consideration under ULIP “B” since aggregate of the
annual premium payable for the ULIPs “X” and “B” together did not exceed Rs
2,50,000 for any of the previous years during the term of ULIP “B”.

 Here instead of ULIP “B”, we could have taken ULIP “A” as the aggregate of annual
premium payable for ULIPs “X” and “A” is also less than Rs 2,50,000 during the
term of these ULIPs. However, since including ULIP “B” instead of ULIP “A” is
more beneficial to the assessee, ULIP “B” has been considered for exemption.

Example 9:

The assessee has the following policies all of which satisfy all the conditions laid down in
clause (10D) of section 10 of the Act (other than the conditions provided under the fourth and
fifth proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2031-32. (It needs to be specified that consideration
under ULIP “X” has not been claimed exempt)

ULIP X A B C

Date of issue 01.04.2021 01.04.2022 01.04.2022 01.04.2022
Annual premium (Rs) 1,00,000 1,00,000 1,50,000 3,00,000
Sum assured (Rs) 10,00,000 10,00,000 15,00,000
Consideration received on maturity as 12,00,000 30,00,000
on 01.05.2031 12,00,000 18,00,000
Consideration received as on 34,00,000
01.05.2032 on maturity

9
Circular No. 2 of 2022
Taxability as per fifth proviso to clause (10D) of section 10 of the Act:

 The consideration under ULIP “X” was not claimed to be exempt under clause (10D)
by the assessee therefore it is not covered within the definition of old ULIP.

 The consideration received under ULIPs “A” and “B” will be exempt under clause
(10D). However, since aggregate of the annual premium payable for the ULIPs “A”
and “B” together did not exceed Rs 2,50,000 for any of the previous years during the
term of any of these ULIPs “A” or “B” and ULIP “X” was not claimed to be exempt
under clause (10D)the consideration received under ULIP “C” will be taxable as per
the provisions of fifth proviso to the said clause (10D) of section 10 of the Act.

Example 10:

The assessee has the following policies all of which satisfy all the conditions laid down in
clause (10D) of section 10 of the Act (other than the conditions provided under the fourth and
fifth proviso of the said clause, applicability whereof is being explained in the example). The
assessee did not receive any consideration under any other eligible ULIPs in earlier previous
years preceding the previous year 2032-33 other than under ULIPs “X” and “Y”.

ULIP X Y A B C

Date of issue 01.04.2021 01.04.2021 01.04.2022 01.04.2022 01.04.2022

Annual premium (Rs) 1,00,000 1,00,000 1,00,000 1,50,000 3,00,000
Sum assured (Rs) 10,00,000 10,00,000 10,00,000 15,00,000 30,00,000

Consideration received on 6,00,000
surrender as on 01.07.2025

Consideration received on 12,00,000
maturity as on 01.11.2031 12,00,000 18,00,000 34,00,000

Consideration received as on
01.11.2032 on maturity

Taxability as per fifth proviso to clause (10D) of section 10 of the Act:

 The surrender value of ULIP “X” and consideration received under ULIP “Y” on
maturity will be exempt under clause (10D) since the annual premium does not
exceed Rs 2,50,000 during the term of these policies.

10
Circular No. 2 of 2022

 The consideration received under ULIPs “A”, “B” and “C” will be taxable under
clause (10D) as per the provisions of fifth proviso to the said clause (10D) since
aggregate of the annual premium payable for the ULIPs “X” and “Y” for the previous
years 2021-22 to 2025-26 was Rs 2,00,000. If the annual premium of ULIP “A” or
“B” or “C” is added then the aggregate of the premium will exceed Rs 2,50,000 for
the previous years 2022-23 to 2025-26.

 As per the provisions of fifth proviso, in case of multiple ULIPs, the aggregate of the
premium payable for all the policies which are claimed to be exempt under clause
(10D) shall not exceed Rs 2,50,000 for any previous year during the term of any of
the policies.

Example 11: If in Example 10, the assessee does not claim exemption with respect to the
surrender value of ULIP “X”, then the consideration received under ULIP “Y” will be
exempt for the previous year 2031-32 and the consideration received under ULIP “B” will be
exempt for the previous year 2032-33 under clause (10D). The exemption is restricted to
ULIP “B” since the aggregate of the annual premium payable for the ULIPs “Y” and “B”
together did not exceed Rs 2,50,000 for any of the previous years during the term of ULIP
“Y” or “B” and the assessee did not claim ULIP “X” as exempt. ULIP “B” is preferred in
place of ULIP “A” as it is more beneficial to the assessee.

Digitally signed by Neha

Neha Sahay Sahay
Date: 2022.01.19 12:57:19
+05'30'
(Neha Sahay)

Under Secretary to the Government of India

Copy to:

1. PS to FM/ OSD to FM/ PS to MoS(F)/ OSD to MoS(F)

2. PPS to Secretary (Revenue)

3. Chairman, CBDT & All Members, CBDT

4. All Pr. DGsIT/ Pr. CCsIT

5. All Joint Secretaries/ CsIT/ Directors/ Deputy Secretaries/ Under Secretaries of CBDT

6. The C&AG of India

7. The JS & Legal Adviser, Ministry of Law & Justice, New Delhi

8. CIT (M&TP), Official Spokesperson of CBDT

9. O/o Pr. DGIT (Systems) for uploading on official website.

10. JCIT (Database Cell) for uploading on www.irsofficersonline.gov.in Neha Digitally signed
Sahay by Neha Sahay
Date: 2022.01.19
12:57:36 +05'30'

(Neha Sahay)
Under Secretary to the Government of India

11