Schedule II 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.
Schedule II to the Income-tax Act, 2025 lists income that is not included in total income, subject to conditions. This article covers serial numbers 1 and 2 of its Table: agricultural income, and any sum received under a life insurance policy, with the conditions tied to the date the policy was issued. The other serial numbers are in our note on Schedule II, serial numbers 3 to 17.
This explanation is as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026. Under section 1(3) the Act came into force on the 1st April, 2026, save as otherwise provided. Later amendments, rules and notifications should be checked. For a short note on where the earlier Act's provisions on exempt income sit in the 2025 Act, see our mapping note on exemptions and the Schedules.
Schedule II is brought in by section 11. In computing the total income of a person for a tax year, the income in column B of the Table is not included, subject to the conditions in column C. Agricultural income (serial number 1) has the condition "Nil". A sum received under a life insurance policy, including bonus (serial number 2), is excluded only if the policy meets the premium to sum assured ratio for its period of issue and, for later policies, the aggregate premium limits; a sum received on death is treated separately. Sums under section 127(4) and under a Keyman insurance policy are not eligible. For help applying this to a return, see income tax return filing.
How Schedule II works
The Schedule is headed "Income not to be included in total income" and carries the reference "". Its opening paragraph says that in computing the total income of a person for a tax year, the income in column B shall not be included, subject to fulfilment of the conditions in column C, and the expressions in columns B and C have the meanings given in the Notes below the Table. The Table has columns A (serial number), B (income not to be included in total income) and C (conditions). Notes are printed after the last row.
Serial number 1: agricultural income
| Serial number | Income not to be included in total income | Conditions |
|---|---|---|
| 1 | Agricultural income | Nil |
The condition column reads "Nil": no condition is attached in this Schedule. Schedule II prints no definition of agricultural income at this row. The scheme of charge is in our notes on section 4 and section 5.
Serial number 2: sums received under a life insurance policy
Column B reads: "Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy."
Clause (a): conditions by period of issue
Column C, clause (a), says the policies, issued during the period in the inner table, shall fulfil the conditions in that table, "except where such sum is received on the death of a person". The copy consulted prints this clause with a trailing "under a life Insurance policy issued by," that does not complete a sentence, so the words are quoted here only as far as they are legible. The inner table, as printed, is:
| Inner serial number | Period of issue of the insurance policy | Conditions |
|---|---|---|
| 1 | 1st April, 2003 to 31st March, 2012 | Premium to sum assured ratio is ≤ 20% |
| 2 | 1st April, 2012 to 31st March, 2013 | Premium to sum assured ratio is ≤ 10% |
| 3 | 1st April, 2013 to 31st January, 2021 | Premium to sum assured ratio is ≤ 15% for special policy; and ≤ 10% for other policies |
| 4 | 1st February, 2021 to 31st March, 2023 | Unit linked insurance policy: (A) premium to sum assured ratio is ≤ 15% for special policy, and ≤ 10% for other policies; and (B) aggregate of premium for all such policies (in any of the tax years during the term of all of such policies) is ≤ Rs. 2,50,000. Other than unit linked insurance policy: premium to sum assured ratio is ≤ 15% for special policy; and ≤ 10% for other policies |
| 5 | On or after the 1st April, 2023 | Unit linked insurance policy: (a) premium to sum assured ratio is ≤ 15% for special policy, and ≤ 10% for other policies; and (b) aggregate of premium for all such policies (in any of the tax years during the term of all of such policies) < Rs. 2,50,000. Other than unit linked insurance policy: (i) premium to sum assured ratio is < 15% for special policy, and < 10% for other policies; and (ii) aggregate of premium for all such policies (in any of the tax years during the term of all of such policies) is < Rs. 5,00,000 |
In the copy consulted the symbol "≤" appears in the first four rows and in part of row 5, while "<" appears in the rest of row 5. The signs are reproduced as printed and not corrected; the official text should be checked for which sign is intended at each place.
Clause (b): policies issued by an IFSC Insurance Office
The aggregate premium conditions of Rs. 2,50,000 and Rs. 5,00,000 in clause (a) do not apply to any sum received under a life insurance policy issued on or after the 1st April, 2025 by the International Financial Services Centre Insurance Office.
Clause (c): sums not eligible
The following sums are not eligible for exclusion from total income: (i) any sum received under section 127(4); and (ii) any sum received under a Keyman insurance policy.
The Note below serial number 2
A Note is printed at the end of this row: for removal of difficulties, the Board may issue guidelines with the previous approval of the Central Government, binding on the income-tax authorities and the assessee, and every guideline issued by the Board under this clause is to be laid before each House of Parliament. What guidelines have been issued is not in the text consulted.
Note 1: the expressions used at serial number 2
Note 1, printed after the Table, defines the following for serial number 2.
| Expression | Meaning in Note 1 |
|---|---|
| Actual capital sum assured | As in paragraph 2(2) of Schedule XV |
| International Financial Services Centre Insurance Office | The same meaning as in regulation 3(1)(k) of the International Financial Services Centre Authority (Registration of Insurance Business) Regulations, 2021, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019) |
| Keyman insurance policy | A life insurance policy taken by a person on the life of another person, who is or was the employee of, or connected in any manner with the business of, the first-mentioned person; it includes such a policy assigned to a person at any time during its term, with or without consideration |
| Premium to sum assured ratio | The highest percentage of annual premium payable to the actual capital sum assured, during the term of the policy |
| Special policy | A policy issued on the life of a person with disability or severe disability as referred to in section 154, or suffering from a disease or ailment specified in the rules made under section 128 |
| United Linked Insurance Policy (as printed) | A unit linked life insurance policy which has components of both investment and insurance and is linked to a unit as defined in regulation 3(ee) of the Insurance Regulatory and Development Authority of India (Unit Linked Insurance Products) Regulations, 2019, made under the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) |
The Note prints "United Linked Insurance Policy"; the Table uses "Unit linked insurance policy". It is a drafting slip and not corrected. The regulations and Acts named are other laws; check them separately. The disabilities in section 154 are in our note on section 154.
A worked example (names and amounts assumed)
Ms. Anjali holds a life insurance policy that is not a unit linked policy, issued on 15 June 2018 (inner serial number 3: 1st April, 2013 to 31st January, 2021). The annual premium payable is Rs. 1,20,000 and the actual capital sum assured is Rs. 10,00,000. (All figures are assumed.)
- Premium to sum assured ratio = Rs. 1,20,000 ÷ Rs. 10,00,000 = 12%. Note 1 takes the highest percentage during the term of the policy, here assumed constant.
- For a policy that is not a special policy, the limit is ≤ 10%. 12% exceeds it, so the sum received on maturity is not excluded under serial number 2, subject to the death exception in clause (a).
- If the policy is a special policy (for example issued on the life of a person with disability as referred to in section 154), the limit is ≤ 15%. 12% is within it, so the condition is met.
- If the sum is received on the death of the person, the period-wise conditions in clause (a) are not applied, as the clause says; the sums listed in clause (c) remain ineligible in any case.
Need help with insurance receipts in your return?
Whether a maturity sum is excluded depends on the date of issue, the type of policy and the ratio, so each policy should be checked on its own papers. Our income tax return filing team can apply Schedule II to your policies and your return.
Key takeaways
- Schedule II, brought in by section 11, excludes income in column B from total income subject to the conditions in column C.
- Agricultural income has the condition "Nil" at serial number 1.
- A life insurance sum, including bonus, is excluded subject to a premium to sum assured ratio set by the date the policy was issued (serial number 2).
- Policies issued from 1 February 2021 face aggregate premium limits, and later ones differ for unit linked and other policies.
- Aggregate premium limits do not apply to policies issued on or after 1 April 2025 by the International Financial Services Centre Insurance Office.
- Sums under section 127(4) and Keyman insurance policies are not eligible.
Read next
- Schedule II, serial numbers 3 to 17: provident fund, pension scheme and other receipts
- Schedule I: exempt income
- Section 4: the charging section
- Section 536: carry-forward of credits, losses and deductions
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.