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Offshore Life Insurance

Tax queries 626 views 1 replies

CA Sachin Rastogi

Audit/IFRS Manager

338 Points Posted on 11 July 2011

Hi Everyone

Under section 10 (10D) of Income tax act 1961, any money received from a life insurance company upon death of a person is fully exempted in the hands of the recipient provided that the premium paid is less than 20% of the sum assured in any of the year.

Now I have two questions:

Will the money received on maturity of the policy is taxable in the hands of the insured person?

Does this exemption applies only for the money received from the insurance companies based in India or it also covers the insurance companies based outside India (eg offshore insurance companies like Zurich International Life or Metlife Alico).

Please advice citing appropriate sections and case laws if any

Replies (1)

CA Mukul Mittal

CA in practice

384 Points Posted on 22 July 2011

Under the provisions of section 10(10D) of the Income-tax Act, 1961, Maturity/Death claims proceeds of life insurance policy, including the sum allocated by way of bonus on such policy (other than amount to be refunded under Jeevan Aadhar Insurance Plan in case of handicapped dependent predeceases the individual or amount received under a Keyman Insurance Plan) is exempted from income-tax. However any sum (not including the premium paid by the assessee) received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20% of the actual capital sum assured will no longer be exempted under this section.

As per Income Tax Act, it has not been specifically mentioned that the insurance company should be of India only.