Payment of one time insurance premium

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Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2014 Should the one time insurance premium be charged in the year of payment or amortized?
If it is to be amortized then for what period?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 September 2014 What is the time period for which Insurance Premium is paid?

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Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2014 the policy is for 10 years but premium is paid once and no further premium will be paid.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 September 2014 Then show it as prepaid insurance and charge it to Profit and Loss accounts proportionately over 10 years.

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Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2014 in case of individual file?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 September 2014 Please tell the exact nature of insurance premium, what type of insurance premium is this?

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Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2014 life insurance for the proprietor.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 September 2014 ideally no. the one time premium policty while does create a potential long term benefit for the individual, however, it is not a pre-paid asset. However, where you pay multiple instalments of insurance premium in advance, you can amortize over period of advance payment.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 September 2014 Deduction available u/s 80C subject to maximum of 10% of Sum Assured. Deduction can be claimed in the year in which premium is paid.

Querist : Anonymous

Querist : Anonymous (Querist)

18 September 2014 Shouldn't it be treated as preliminary expense?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 September 2014 No dear. Its Life Insurance Premium paid by Proprietor deduction for which is available u/s 80C subject to maximum of 10% of Sum Assured. No other treatment.

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