Taxability of Maturity amount from Life insurance policy

Tax queries 308 views 3 replies

Syed Mohamid Hasan

Senior Accountant

21 Points Joined January 2018

Dear Sir/Mam,

I am filing Income Tax return of my uncle. IN 26AS, TDS has been deducted u/s 194DA.

Name of the deductor is Bajaj Allianz Life Insurance Company Limited

Total amount credited/paid- Rs 573057.

Total tax deducted- Rs 5731.

My question is

1.)whether this entire amount of Rs 573057 would be taxable?do i need to take entire amount into computation or only the amount received over and above total premium paid would be taxable?

2.)it will be taxable under the head "OTHER SOURCES" but what will be the nature of income(for ex interest,etc??)

Please guide me with constructive feedback. Thank You.

Regards,

Hasan

Replies (3)

Kapadia Pravin

17264 Points Joined December 2018

Show it under Exempt Income schedule and claim TDS as per 26AS

Syed Mohamid Hasan

Senior Accountant

21 Points Joined January 2018

With due respect, your answer is incorrect because proceeds from LIC on maturity is not exempt u/s 10(10D) in all cases.

194DA - Maturity of life insurance policy attracts 1% TDS deduction on the gross proceeds in case conditions relating to exemption were not satisfied. Under section 10 (10D), maturity proceeds received under a life insurance policy are exempt from tax. However, the benefit is not extended to policies where the annual premium exceeds 10% (20% in case of policies sold prior to April 2012) of the sum assured and if gross receipts exceeds Rs 100000.

If TDS has been deducted, it clearly shows that provisions of Section 10(10D) has been violated while paying annual premium and therefore it cannot be claimed as an exempt income.

My question was not whether its taxable or not because I know its taxable. My question is whether entire amount of Rs 573057 is taxable or only amount received over and above total premium paid is taxable?

Regards,

Hasan