Vivek Harlalka (Article Assistant) (40 Points)
08 March 2016I had taken an insurance policy of Jeevan Anand (Survival Benefit) Table no. 149 for 6 years in year 2008.
Sum Assured - Rs. 5 lacs
Total premium Paid during the tenure - Rs. 122949*6 = 737694
Maturity Amount received on 07.01.2015 - 594860
TDS deducted on maturity - 12140.
My query is that what will be the tax treatment in A.Y. 2015-16 on receipt of the maturity amount. What portion of the maturity amount will be liable for income tax?
Expecting Reply.
CA PRATIK DHRUVE
(CHARTERED ACCOUNTANT)
(634 Points)
Replied 09 March 2016
Since the premium amounts to more than 20% of the sum assured, the maturity proceeds will be fully taxable.
(20% should be read for policies issued before 01st April 2012, after which the rate is 10%)
Vivek Harlalka
(Article Assistant)
(40 Points)
Replied 09 March 2016
Yes, but there is something given in CIrcular 07/2013 which is as under :-
Restriction of tax benefits in respect of certain insurance policies having premium of more than twenty per cent of the actual capital sum assured
10.1 Under the existing provisions contained in clause (10D) of section 10, any sum received under a life insurance policy including the
sum allocated by way of bonus on such policy, (other than any sum received under a policy for the medical treatment, training and
rehabilitation of a handicapped dependent under section 80DDA or any sum received under a keyman insurance policy), is tax-exempt.
10.2 Under the existing provisions of section 88, a deduction from the income-tax payable is allowed to an individual or a Hindu
undivided family (HUF), in respect of any sums paid or deposited in PPF, GPF, NSC, insurancep remia, etc. The deduction is allowed at
specified percentage of such sums.
10.3 The insurance policies with high premium and minimum risk covers are similar to deposits or bonds. With a view to ensure that
such insurance policies are treated at par with other investment schemes, amendments have been made in section 88 and clause (10D) of
section 10. The existing clause (10D) of section 10 has been substituted so as to provide that the exemption available under the said
clause shall not be allowed on any sum received under an insurance policy issued on or after the 1st day of April, 2003, in respect of
which the premium payable in any of the years during the term of the policy, exceeds twenty per cent of the actual capital sum assured.
In view of this, the income accruing on such policies (not including the premium paid by the assessee) shall become taxable. However,
any sum received under such policy on the death of a person shall continue to remain exempt. The new provision also provides that the
amounts received under sub-section (3) of section 80DD, shall not be exempt under this clause.
10.4 For the same reasons, a new sub-section (2A) has been inserted in section 88 which provides that the deduction in respect of the
sums paid or deposited as premium under an insurance policy shall be available only on so much of any premium or other payment made
on an insurance policy other than a contract for a deferred annuity as is not in excess of twenty per cent of the actual sum assured.
10.5 It has also been clarified in both the sections that the value of any premiums agreed to be returned or any benefit by way of bonus or
otherwise, over and above the sum actually assured, which may be received under the policy by any person, shall not be taken into
account for the purpose of calculating the actual capital sum assured.
10.6 These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-05 and subsequent years.
So, according to this what amount will be taxable. Please Comment
Tarun Sharma
(2 Points)
Replied 07 February 2018
Deepak Nayak
(Chartered Accountants)
(26 Points)
Replied 18 August 2018
Dear Mr. Dhruve,
As per CBDT Circular no. 03/2013, premium paid amount is required to be deducted. Further these maturity proceeds are to be taxed under the head Income from Other sources u/s. 56 & you can claim deduction of premium paid u/s 57. Kindly confirm.
Regards,
CA DEEPAK NAYAK
CAclubindia
