Suggest tax planning

Tax planning 548 views 3 replies

Bhavani Shankar

Employed

135 Points Joined November 2010

A woman received money from insurance company towards accident claim. Accident happened 7 years ago(2005). Insurance company went on appleal to district court where case was decided i favour of woman. Insurance Company appealed to High court where the case was decided in favour of woman in 2012. The court has also certified the woman with 60% diability.

Insurance amount to be received - Rs. 2,35,000

High court has ordered Insurance company to compensate wit interest @ 7.7% for 7 years. She has a salary income for AY 2013-14 Rs.3,60,000/- before Ch VI A Deduction. Assume she has LIC For Rs.1,00,000/-.

Please suggest

i) Whether accident claim is exempt , if so under which section?

ii) Interest on compensation receivable is taxable under Income from other sources. Whether payment made to advocated and incurred in legal proceedings can be claimed as expenditure against such interest?

iii) whether she can claim 80U benefit?

iv) Any other suggestions

Thanks in advance

Replies (3)

Ravi Kumar Mahaur

CA-FINAL

202 Points Joined August 2010

(i) Yes insurance compensation money is exempt u/s 10(10D)

(ii) Yes such interest is taxable u/h "IOS"

(iii) Yes she can claim deduction u/s 80U

Bhavani Shankar

Employed

135 Points Joined November 2010

Yes But does the section 10(10D) say about accident claim received . I thinks it speaks about only maturity of life insurance...

saurabh jain

Audit Specialist

271 Points Joined August 2008

HI,

1. As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a Life Insurance Policy, including the sum allocated by way of bonus on such policy is exempt from tax. However if claim received on death that is always tax free under section10 (10D).

2. In case of taxable dividend income and interest from securities, any reasonable sum paid by way of remuneration or commission for the purpose of realizing such income including interest on borrowed capital if such borrowed capital is used for making investment in shares or securities.

In case of any expenditure other than capital expenditure or personal expenditure which has been incurred wholly, necessarily and exclusively for earning income like revenue expenditure, such expenditure will also be allowed as a deduction.

So it can be claimed as deduction.

3. 80 U can be claimed always in any case..

Regards,

Sourabh jain