shilpawandee (srudent) (26 Points)
15 July 2019
Dhirajlal Rambhia
(SEO Sai Gr. Hosp.)
(161173 Points)
Replied 16 July 2019
Rs. 1,50,000/- provided Sec. 80C deduction not availed over 1 lakh premium paid.
shilpawandee
(srudent)
(26 Points)
Replied 16 July 2019
Suresh Thiyagarajan
(Student)
(3986 Points)
Replied 16 July 2019
1. Single premium life insurance (SPLI) comes with high premium and maturity proceeds. Unlike a typical insurance policy where premium paid will lower when compared to its maturity proceeds. Hence SPLI will be treated in par with deposits.
2. According to sec 80C, premium paid will be allowed only to the extent of 10% of the maturity proceeds. And maturity proceeds are taxable in the hands of the policyholder subject to sec 10(10D) exemption.
3. With respect to SPLI, the same will be allowed as deductions u/s 80C subject to 10% of the maturity proceeds. And income over and above the premium will be subject to tax under the head Income from Other Sources.
4. In the given case deductions under sec, 80C will be 25,000 (2,50,000*10%) and at the time of maturity, Rs. 2,50,000 the amount which is over and above the premium will be subject to tax Rs. 1,50,000 (2,50,000-1,00,000) just like deposits.
5. However, the important point to be noted here is, out of the above Rs. 100,000 if Rs. 25,000 was already claimed as deductions u/s 80C it is logical to neglect that amount and pay the tax for Rs. 1,75,000 (2,50,000-75,000). However, if you have not claimed as deductions then Rs. 1,50,000 alone will be taxable.
Please correct me if the above solution has an alternative view.
CAclubindia
