17 July 2017
Case. TDS was deducted @ 1% u/s 194DA on total proceeds of Life Insurance Policy. Q1. Are the proceeds taxable? If yes, to what extent it is taxable. Q2. Will the premium paid for which we didn't claimed any deduction u/s 80C will be allowed to be deducted from such maturity amount before being taxed.
17 July 2017
Insurance Policy Proceeds are considered exempt income u/s 10(10D) of the I.T. Act. In general life insurance policy proceeds including bonus thereon is considered exempt. The exceptions to this are a) sum received under a Keyman Insurance Policy b) for policies issued from 01.04.2003-31.03.2012 if the premium payable for any of the years is > 20% of actual capital sum assured, where sum is received otherwise than on death of person c) for policies issued from 01.04.2012 if premium payable for any of the years > 10% of capital sum assured, where sum is received otherwise than on death of person.
Section 194DA expressly states that tax is not to be deducted in cases covered by Section 10(10D). Hence assuming that the payer has properly analysed the provisions and deducted tax appropriately, the proceeds from LIP will have to be offered to tax. I believe no deduction will be available for the premiums irrespective of whether claimed or unclamed u/s80C