@abhihet wrote:
1)in respect of taxation of life insurance policy whether California State tax rules are different from federal tax rules?
2)What is the tax rate for insurance policy taxation on maturity proceeds in California State tax &/or federal tax?
3)Any benefit of tax rate mentioned in India -USA DTAA agreement?
In general, CA is a "conforming state" and will follow the federal definition of what constitutes taxable income.
A life insurance death benefit is not taxable to the beneficiary. If you have a "whole life" policy or something else that acts as an investment vehicle, your taxable income is the difference between the cash value at maturity and your premiums. For example, if you paid $100 per month for 20 years ($24,000) and the policy is now worth $100,000, your taxable income would be $76,000. The policy company should provide this information to you. The proceeds will likely be some combination of interest, dividends and capital gains, which will be taxable as ordinary income or as capital gains, depending on how it is reported. You should ask the company.
@pk will have to answer about rates. If you are a US taxpayer, you should expect to pay the US rate on all your US income.
