iv. Sources

vii. Annuities and proceeds from life insurance or other types of insurance

Annuity – payments made at regular intervals, which may be payable for a person's life, a fixed period, or another period specified in the contract. Amounts excluded from gross income:

• Amount received by insured as return of premium received either during the term or at the maturity of the terms or upon surrender of the contract; Note: If such amounts are held by the insurer under an agreement to pay interest, the interest payments shall be included in the gross income.
• Proceeds of life insurance policies paid to the heirs/beneficiaries upon the death of the insured; (See Sec. 32(B)(1).)¹
• If such amounts are held by the insurer under an agreement to pay interest, the interest payments shall be included in the gross income

Note: Life-insurance proceeds paid to heirs or beneficiaries upon the insured’s death are excluded from gross income. Amounts received by a surviving insured as a return of premiums paid under a life-insurance, endowment, or annuity contract are likewise excluded; any amount exceeding those premiums is not excluded on that basis. (See Sec. 32(B)(1)–(2).)