Rule 59 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 59 of the Income-tax Rules, 2026 computes income chargeable under section 92(2)(l) on a life insurance policy as A − B in the first tax year and C − D in every year after it.
The two formulas
| Year | Formula | Components |
|---|---|---|
| First tax year — the year in which a sum is received under the policy for the first time | A − B | A = the sum or aggregate of sums received under the policy during the first tax year. B = the aggregate premium paid during the term of the policy till the date of receipt in that year that has not been claimed as a deduction under any other provision of the Act |
| Subsequent tax year | C − D | C = the sum or aggregate received during the subsequent tax year. D = the aggregate premium paid till the date of receipt in that year, not being premium which (a) has been claimed as a deduction under any other provision of the Act, or (b) is included in amount 'B' or amount 'D' of this sub-rule in any preceding year |
The premium pool in rule 59 passes two filters before it can be set against a receipt. It must not have been claimed as a deduction elsewhere in the Act — a premium that already produced a deduction cannot also reduce this income — and it must not have been used in an earlier year's B or D. Keeping a single cumulative schedule of premiums, marked for each filter, is the only workable way to apply the rule across a long-running policy.
Note the asymmetry with rule 49, which governs unit linked policies. There, the receipt side is also reduced for amounts already considered. Here, only the premium side carries the carry-forward exclusion — because the section 92(2)(l) charge is computed year by year on that year's receipts.
What is a "sum received"
Sub-rule (2): the sum received under a life insurance policy means any amount, by whatever name called, received under such policy that is not excluded from the total income of the tax year in accordance with Schedule II , other than a sum:
- received under a unit linked insurance policy; or
- being the income referred to in section 92(2)(d).
| Receipt | Rule |
|---|---|
| Sum under a life insurance policy not exempt under Schedule II | Rule 59 |
| Sum under a specified unit linked insurance policy | Rule 49 — capital gains, deemed transfer of an equity-oriented fund unit |
| Income referred to in section 92(2)(d) | Outside rule 59 |
| Sum excluded under Schedule II | Not income at all |
The phrase "by whatever name called" is doing real work: maturity proceeds, survival benefits, partial withdrawals and bonus allocations are all caught if they are not exempt, whatever the policy document calls them. The rule's own opening words confirm it, referring to "any sum, including the amount allocated by way of bonus".
Worked example
A non-exempt life insurance policy with annual premium of Rs 3,00,000, of which Rs 1,50,000 a year was claimed as a deduction elsewhere:
| Event | Computation under rule 59 |
|---|---|
| Year 7 — first receipt of Rs 8,00,000 including bonus; premiums paid Rs 21,00,000, of which Rs 10,50,000 was claimed as a deduction | A = 8,00,000; B = 10,50,000 — only the unclaimed half counts |
| Year 10 — receipt of Rs 6,00,000; further unclaimed premium since year 7 is Rs 4,50,000 | C = 6,00,000; D = 4,50,000 — the Rs 10,50,000 used in B is excluded |
| Bonus allocated with the maturity proceeds | Included in the sum received |
| Survival benefit described as a "guaranteed addition" | Included — by whatever name called |
| Proceeds exempt under Schedule II | Not a sum received for rule 59 |
| Receipt under a ULIP | Rule 49 applies instead |
Compliance checklist
- Confirm the policy is not a unit linked insurance policy — rule 49 governs those.
- Check whether the receipt is excluded under Schedule II before computing anything.
- Identify the first tax year of receipt correctly — it fixes which formula applies.
- Build a cumulative premium schedule for the whole term of the policy.
- Exclude premiums claimed as a deduction under any other provision.
- Exclude premiums already included in an earlier B or D.
- Aggregate premiums to the date of receipt, not to the year end.
- Include bonus and every other amount by whatever name called.
- Exclude income referred to in section 92(2)(d).
Common mistakes
- Deducting the full premium without removing amounts claimed elsewhere.
- Reusing premium already absorbed in an earlier year.
- Applying rule 59 to a ULIP.
- Excluding a survival benefit because the policy calls it something else.
- Computing on exempt proceeds that Schedule II already removes.