02 December 2021
Dear Sir > Maturity value received from single premium ULIP policies are taxable as the premium paid in a year will be definitely more than 20% of sum assured upto 31.3.2012 and more than 10% after 31.3.2012. So almost all such single premium policies do not fall under section 10 (10D). In this situation which is the most advantageous way to deal with it and pay minimum tax.
02 December 2021
It is good that there is clarity to pay tax over the excess amount received than the aggregate premium paid, at slab rate. The thing is to be considered while purchasing such policy and compared with other alternatives.
03 December 2021
Thank you for the reply. The reply was too short . May I give an illustration for getting clarity. In such a policy single premium paid is Rs 2 lakhs and the sum assured is Rs 2.50 lakhs while the policy is redeemed for Rs 5 lakhs in PY 2020-21. Now the taxable income will be Rs 3 lakhs being excess over Premium amount. Is this a correct calculation ?
03 December 2021
Thank you very much for clearing my chronic doubt. I thought of offering only 80% /90% of the said taxable amount assuming that the Law is speaking about premiums exceeding 20%/ 10% .
03 December 2021
Actually, you are correct in a way. There is much ambiguity prevailing on the taxability of the maturity amount, as the section 10(10D) does not clarify the taxable amount. When there was amendment (from date 01.09.2019) in section 194DA for TDS deduction over the total maturity amount to ... "5% on the amount of income comprised therein" ... the clarity prevailed over the taxable amount.
CAclubindia
