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NIA Life Agent study materials
NIA Life Agent study resources

NIA Life Agent: Taxation of Life Insurance and Anti-Money Laundering

NIA Life Agent · Work through your exam, one topic at a time.

All guide sections

Taxation of Life Insurance and Anti-Money Laundering

Tax questions mix deductions, exemptions and thresholds; AML questions test your role as the insurer's first line of KYC defence.

Direct tax

  • Section 80C: deduction up to ₹1.5 lakh for premium on a policy on your own life, your spouse's or your children's. Premium for parents does not qualify here.
  • Section 10(10D): maturity and survival benefits are exempt where premium does not exceed 10% of the sum assured (20% for policies issued before 1 April 2012; 15% for policies for persons with disability or specified disease). The death benefit is always exempt.
  • ₹5 lakh aggregate premium rule: for non-ULIP policies issued on or after 1 April 2023, aggregate annual premium above ₹5 lakh withdraws the 10(10D) exemption; ULIPs issued on or after 1 February 2021 face a ₹2.5 lakh threshold.
  • Section 194DA: TDS at 2% on taxable maturity proceeds where the payment is ₹1 lakh or more.
  • Pension: Section 80CCC within the overall ₹1.5 lakh ceiling; Section 10(10A) for commutation.
  • GST: individual life premiums were taxed at 18%; following the 56th GST Council decision effective 22 September 2025, individual life and health insurance policies are exempt, while group policies need checking.

Anti-money laundering

  • PMLA, 2002 makes insurers reporting entities; KYC and customer due diligence are mandatory; no anonymous or fictitious accounts; risk-based approach and enhanced due diligence for politically exposed persons.
  • Report cash transactions of ₹10 lakh or more and suspicious transactions of any amount to FIU-IND; a suspicious transaction report follows within seven days of forming the suspicion; records are retained for five years.

Worked example

A client offers ₹1,20,000 in cash for a single-premium policy. Reasoning: KYC with PAN and source of funds, a reportable cash transaction, and, if the pattern suggests layering, a suspicious transaction report.

Traps

"All maturity proceeds are tax-free." "Premium for parents qualifies under 80C." "TDS means the amount is automatically taxable." "Cash premium is a private matter between agent and client."