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Section 43b of income tax act

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(Querist)
13 August 2015 An Individual Assessee (subject to Tax Audit) has taken loan from L.I.C against his Policy. He has not been paying interest over the loan, the loan principal and interest will be subtracted from the policy proceeds when it matures.
My query is whether the interest will be allowed on accrual basis or disallowed u/s 43B. Whether L.I.C. is a financial institution for the purpose of aforesaid section?
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Amol S Joglekar

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Amol S Joglekar (Expert)
13 August 2015 LIC, GIC are very much covered under the definition of Financial Institution.

The same shall be disallowed under section 43B.

The better course would be not to claim the same and debit it to DRAWINGS account.
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