I am a UK-based non-resident Indian (NRI). I want to purchase the IndiaFirst Life Wealth Wise Plan insurance plan from Gift City. I would like to clearly understand the tax implications in India with respect to the maturity proceeds.
-Name withheld on request
Effective 1 April 2025, maturity proceeds from life insurance policies issued by insurers located in an International Financial Services Centre (IFSC) are fully exempt from income tax, irrespective of the premium amount, provided the premium paid in any of the years of the term of the policy does not exceed 10% of the sum assured, according to the amendment introduced by the Finance Act 2025.
Moreover, the proceeds received upon the insured’s death are fully exempt from tax, regardless of whether the premium payable in any year of the policy term exceeds 10% of the sum assured.
The policy you mentioned is whole life insurance, meaning it offers lifelong protection (up to 99 years of age), unlike term insurance, which provides coverage for a specific period. As per the provisions of the income tax law, any maturity benefits under this policy would be fully exempt provided the premium does not exceed 10% of the sum assured, whereas death benefits under this policy will be wholly exempt without any such restriction.
I live in the US and want to sell an Indian property that I inherited from my parents this year. What is the rate of TDS that will apply to me—20% or 12.5%?
-Name withheld on request
When an NRI sells a property in India, the buyer is required to deduct tax at source (TDS) as prescribed under the Indian tax laws. The applicable TDS rate depends on whether the property qualifies as a short-term capital asset or a long-term capital asset. Immovable property being held for more than two years qualifies as a long-term capital asset and vice versa. The period of holding would also include the property holding period of your parents. For non-residents, short-term capital gains are subject to a TDS rate of 30% whereas long-term capital gains are subject to a TDS rate of 12.5%. (Applicable surcharge and cess are levied additionally).
TDS is applicable to the amount of capital gains that you will earn. Therefore, the buyer should deduct TDS only on the amount of capital gains and not the entire sale consideration. However, in practice, in the absence of a lower/nil tax deduction certificate from the tax officer, the buyer usually deducts TDS on gross sale consideration for the risk of being deemed as an assessee-in-default.
Harshal Bhuta is a partner at P. R. Bhuta & Co. Chartered Accountants.
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