Proceeds received by the nominee on the death of the insured is tax free in the hands of the nominee.
But, if a policy is a Keyman insurance policy then the proceeds are not tax free.
For a life insurance policy issued between 1 April 2003 and 31 March 2012 if the premium payable in any year exceeds 20% of the actual sum assured, then the policy proceeds would be taxable for the insured at the marginal rate of taxation.
For life insurance policies issued on or after 1 April 2012 if the premium payable exceeds 10% of the sum assured, the policy proceeds would be taxable at the marginal rate of taxation.
In case of severe disability or disease, as specified by the Income Tax Act, and if his/her policy was issued on or after 1 April 2013, then the limit of 10% will be increased to 15%
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