EMPLOYER EMPLOYEE INSURANCE
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
20 May 2011
A lige insurance Company has obtained an opinion from a reputed firm of C.A.s which is marked as "For Internal Circulation only"
IN THIS OPINION IT HAS BEEN ADVISED LIKE THIS
Employer will pay some premium on any plan of life insurance for emploee(s). Premium paid will be claimed as expenditure U/s 37(1).
Once policy is issued, it will be assigned in favor of the employer by employee.
Opinion of that reputed firm claims that
" Premium paid by employer need not be included in income of the employee becuase "it can be argued" that since the employee has assigned the policy in favor of employer, no benefit arises in the hands of the employee.
It is claimed by insurance Company agents and managers that many C.A.s are advising their client to go for this scheme of tax deferment based on this opinion.
To my understanding above "could be arguement" cannot be accepted by the Income Tax department and employee/client may end up paying tax+interest+penalty.
Experts are requested to make their comments
IN THIS OPINION IT HAS BEEN ADVISED LIKE THIS
Employer will pay some premium on any plan of life insurance for emploee(s). Premium paid will be claimed as expenditure U/s 37(1).
Once policy is issued, it will be assigned in favor of the employer by employee.
Opinion of that reputed firm claims that
" Premium paid by employer need not be included in income of the employee becuase "it can be argued" that since the employee has assigned the policy in favor of employer, no benefit arises in the hands of the employee.
It is claimed by insurance Company agents and managers that many C.A.s are advising their client to go for this scheme of tax deferment based on this opinion.
To my understanding above "could be arguement" cannot be accepted by the Income Tax department and employee/client may end up paying tax+interest+penalty.
Experts are requested to make their comments
27 February 2012
I think the concept has been misunderstood by the writer as he/she has heard and understood incorrectly.
To clear up, it cannot be any insurance plan but certain types only, various scenarios exist.
Policy will be assigned by employer to employee and not other way around, only in case of death the sum insured is payable to employee's family.
The reputed law firm's opinion is correct as policy is with Employer who enjoys tax benefits and not employee until assigned.
This scheme can be a tax deferment most of the times or a tax waiver in some situations of short nature, usually where employer is also an employee.
IT dept has to accept if scheme has correctly been followed, however many times not done as banker or insurance company managers or agents are not aware on even simple issues like how to pay premiums under this scheme, when to do assignment etc and wildly advise customers in order to meet their targets, though Not authorised, customers end up paying as writer mentions.
This scheme should only be done by tax consultants or CFP or similar like CFPA's ONLY if aware of the scheme completely.
To clear up, it cannot be any insurance plan but certain types only, various scenarios exist.
Policy will be assigned by employer to employee and not other way around, only in case of death the sum insured is payable to employee's family.
The reputed law firm's opinion is correct as policy is with Employer who enjoys tax benefits and not employee until assigned.
This scheme can be a tax deferment most of the times or a tax waiver in some situations of short nature, usually where employer is also an employee.
IT dept has to accept if scheme has correctly been followed, however many times not done as banker or insurance company managers or agents are not aware on even simple issues like how to pay premiums under this scheme, when to do assignment etc and wildly advise customers in order to meet their targets, though Not authorised, customers end up paying as writer mentions.
This scheme should only be done by tax consultants or CFP or similar like CFPA's ONLY if aware of the scheme completely.
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