life insurance

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G.SUNILKUMAR (Querist)

29 December 2007 WEF 1.4.2003, the maturity of all life insurance premiums paid in excess of 20% of the sum assured are taxable. Please expain me in context of section 10, whether the entire maturity amount is taxable or only the difference between the maturity amount and the premium paid is taxable.

R.V.RAO

R.V.RAO (Expert)

29 December 2007 SIR,
AS PER SECTION 10D OF INCOME TAX ACT, ANY SUM INCLUDING BONUS ON LIFE INS. POLICY IS EXEMPT FROM TAX EXCEPT UNDER KEY MAN INS. POLICY.
THERE IS NO EXPRESS CLAUSE UNDER THIS SECTION ABOUT TAXING A PART OF THE SAME IN CASE OF ANY PARTICULAR CIRCUMSTANCES LIKE PREMIUM PAID IN EXCESS OF 20% OF SUM ASSURED.
AS FOR PREMIUM, YOU HAVE ALREADY SUFFERED NON DEDUCTION BENEFIT WHEN THE PREMIUM EXCEEDED 20 % OF OF SUM ASSURED. SO I DONT KNOW WHY WE SUFFER TAX CUT AGAIN ON MATURITY?
I STAND TO BE CORRECTED IN THIS REGARD ABOUT MY VIEWS IN CASE THE TAXATION/LEGAL POSITION IS OTHERWISE?
R.V.RAO

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)

02 January 2008 As per proviso 'c' of 10D, whole sum received in this case will be out of the ourview of exemption u/s. 10D.
But it does not say that refund of one's own investment will be deemed to be income of the recipient.
Please comment...

Late CA Sampat Jain

Late CA Sampat Jain (Expert)

07 January 2008 The intepretation that entire maturity amount including refud of premium paid will be taxable will lead to absurd situation that return of once own investment is charged as income.......this leads to absurdity .....such interpretation need to be avoided as per SC judgment

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