Specifics of case: If an employer opts for and solicits life insurance for all its staffs under an “Employer Employee” Plan wherein the employer pays the premium. The said policies are all long term investment plans and the employer does not want to retain any money out of this. The only idea had been to provide life cover to the staffs. In this case, the respective staffs are the life insured and the employer remains the owner of the policy. Receipts of premiums paid are issued in the name of the employer, which claims the same as business expenditure. After paying premiums for 3 years; the employer absolutely assigns the said policies to the respective staffs who become owners thereof.
1. In the above mentioned case; do the above transactions amount to perquisites in the hand of employee?
2. If the transaction is a perquisite; whether it is so on year to year basis, when the employer is paying premiums or when assignment has been made?
3. Also, what should be the value of taxable perquisite in the hands of the employee?
4. Will the value of perquisite be a) the premiums paid by employer up to assignment, b) fund value standing to the credit of the said policies on date of assignment, or c) the surrender value of the said policies on date of assignment?
Please provide guidance on the said matter.
CAclubindia
