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Taxation of income not exempt under section 10(10d)

Roshan (-) (109 Points)

10 June 2016

The income from insurance proceeds is taxable if it does not fall under Section 10(10D) exemption. My questions are:

Under which head will the Income be taxed?
Can the premium paid be reduced from the insurance proceeds?
What is Section 88 relief?

If I were to put my question into question with figures, a person recieved Rs. 5,00,000 from LIC. He had paid a premium of Rs. 3,00,000. TDS was deducted from the insurance proceeds at 2% under section 194DA. What will be the Taxable amount in this case and under which head should it be shown.

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4 Replies

Krunal (Expert) (44 Points)
Replied 10 June 2016

As per my openion:

1) Income is taxable under head income from other sources.

2). no premium paid will be deducted from proceeds because you already enjoyed deduction u/s 80C.

1 Like

CA Saurabh Singh (Practising Chartered ) (974 Points)
Replied 10 June 2016

Hi Roshan,

If the amount of insurance is not exempt by virtue of sec10(10D), the same would be taxable under head "Income from other sources" and no deduction of expenses are allowed under this head. Therefore the entire amound would be chargeable to tax i.e. 5,00,000.

However relief u/s 88 could be availed if following conditions are fullfilled:

i. in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, is one lakh fifty thousand rupees or less, twenty per cent of the aggregate of the sums

Provided that an individual shall be entitled to a deduction of an amount equal to thirty per cent of the aggregate of the sums referred to in sub-section (2) if his income under the head "Salaries"—

(a) does not exceed one lakh rupees during the previous year before allowing the deduction under section 16

(b) is not less than ninety per cent of his gross total income, i.e before making any deductions

ii. in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, is more than one lakh fifty thousand rupees but does not exceed five lakh rupees, fifteen per cent of the aggregate of the sums

iii. in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, exceeds five lakh rupees, nil.

Hence accordingly the relief and income could be determined.

Thanks

1 Like

Roshan (-) (109 Points)
Replied 10 June 2016

Originally posted by : CA Saurabh Singh
	Hi Roshan, If the amount of insurance is not exempt by virtue of sec10(10D), the same would be taxable under head "Income from other sources" and no deduction of expenses are allowed under this head. Therefore the entire amound would be chargeable to tax i.e. 5,00,000. However relief u/s 88 could be availed if following conditions are fullfilled: i. in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, is one lakh fifty thousand rupees or less, twenty per cent of the aggregate of the sums Provided that an individual shall be entitled to a deduction of an amount equal to thirty per cent of the aggregate of the sums referred to in sub-section (2) if his income under the head "Salaries"— (a) does not exceed one lakh rupees during the previous year before allowing the deduction under section 16 (b) is not less than ninety per cent of his gross total income, i.e before making any deductions ii. in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, is more than one lakh fifty thousand rupees but does not exceed five lakh rupees, fifteen per cent of the aggregate of the sums iii. in the case of an individual or a Hindu undivided family, whose gross total income before giving effect to deductions under Chapter VI-A, exceeds five lakh rupees, nil. Hence accordingly the relief and income could be determined. Thanks