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TDS on insurance

27 June 2019

I have received maturity amount of lic rs. 5 lakh after deduction TDs of 1 percent , I will show this in income from other source , can I claim premium as expense in income from other source , can show net margin in other source income, as I have not claimed deduction earlier.

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5 Replies

Suresh Thiyagarajan (Student) (3986 Points)
Replied 27 June 2019

1. According to sec 194DA, 1 % of the maturity proceeds will be deducted by LIC if the payment exceeds Rs. 1,00,000. However, the above deduction is subject to exemption u/s 10(10D).
2. In your case since they have deducted TDS @ 1% on Rs. 5,00,000, it should not be an exempt income. It will be taxed under the head Income from Other Sources.
3. According to sec 57(iii), any other expenditure incurred (other than capital expenditure) laid out or expended wholly or exclusively for the purpose of making or earning such income will be allowed as deduction.
4. Keeping the above provision in mind it can be said that premium paid is an expense incurred and claim that against maturity proceeds.
5. However, the basic presumption is that LIC premium is exclusively allowed as deduction u/s 80C and it will not qualify as expenses. However, in situations where LIC premium is not allowed as a deduction, it may be considered for expenses. But in most of the cases, it will be allowed only as deduction u/s 80C.
6. Even though you have not claimed it as a deduction but it may raise doubt if you deduct the premium from maturity proceeds. Since your maturity proceeds reflected in your 26AS will be Rs. 5 lakhs.
Please correct me if the above interpretation has an alternative view.

Sukhveer Singh (128 Points)
Replied 27 June 2019

sir deducted is allowed upto 10 percent of the maturity value of policy . in my case premium was above 10 percent of matured value of policy. so I did not cliam exemption

Suresh Thiyagarajan (Student) (3986 Points)
Replied 27 June 2019

1. Yes. Since your premium amount was higher than 10% of the maturity proceeds it is not exempt u/s 10(10D).
2. With respect to your claim of premium as expenses will raise a doubt. But since there is no supporting provision which says that you should not claim the premium as an expense u/s 57, you can try. But in my opinion, it is better not to. Because if you claim it will go down to decrease your tax liability only to that extent of premium expenses.