A keyman Insurance Policy was purchased by Co. in 2005 and later it was assigned to the director of the company. He regularly pays the premium amount of the same and consequently claim deduction of the loan. During 2014-15, the LIC policy was matured and an amount of Rs.36,70,000/- was received with details as follow: Basic Amount : 25,00,000 Vested Bonus : 10,57,500 Interim Bonus : 1,12,500 Gross Payable : 36,70.000 Now TDS has been deducted u/s 194DA of Rs.73,400/- which is 2% of Rs.36,70,000/-. What should be its tax transaction???
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How should be amt received from lic treated in tax laws
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later means?
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The amount on claim or maturity under a keyman insurance policy is not exempt under Section 10 (10D) of the Income Tax Act if the company is paying the premiums. However, in case the policy has been assigned to the keyman and the keyman is paying the premiums, then the claim/maturity proceeds are exempt under Section 10 (10D).
If the policy, after attaining surrender value, is endorsed to the employee, then the surrender value/maturity value is chargeable to tax under Section 17 of the Income Tax Act. This is because it is treated as `profit in lieu of salary’ in the hands of the employee.
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