Keyman Insurance Policy

  1. Assignment of Policy to Keyman:

The policy can be assigned to keyman. The surrender value at the time of assignment will be taxable in the hands of keyman as "Profit in lieu of Salary"

After assignment the company's payment towards premium will be taxable in the hand of keyman as perquisite and the expenditure will be allowed as deduction to the company.

Keyman can claim deduction under Section 80C (as it is deemed that the amount is being paid out of his income). Basically it depends upon the terms of employment and such I think that the expenditure willbe allowed to the company.

2. Yes- he is entitled to claim deduction U/s 80C

3. The company will receive surrender value which is taxable.

Further...

If company receives any amount after the maturity of policy it will be taxable in the hands of the company.

If employee receives the amount after surrendering the policy in his name, as discussed in para 1 above, section 10(10D) benefits are available. 

Dear Paras,

Thanks for your advice.

Ramesh P.