HDFC Life Insurance Company has reported receiving an income tax demand totaling ₹296.76 crore from the Assistant Commissioner of Income Tax, Central Circle 6(2), Mumbai, on September 25, 2024. This order pertains to the assessment year 2022-23 (financial year 2021-22) and includes a tax demand of ₹255.93 crore along with interest of ₹40.83 crore, according to the company's regulatory filing.
In response to the demand, HDFC Life stated, "While calculating the above tax demand, there are arithmetical inaccuracies involved. The company is in the process of filing a rectification application before the tax authority concerning the above." The company anticipates that, following the rectification order, the adjusted tax demand will be approximately ₹116 crore, with the interest recalculated accordingly.
The life insurer emphasized that the order is subject to appeal, and it plans to file its appeal within the designated time frame. HDFC Life disclosed specific allegations of violations or contraventions, including:
- Classification of shareholders' net investment income as "income from life insurance business" rather than "income from other sources."
- Incorrect claims for certain incomes as exempt under Section 10 of the Income Tax Act.
- Erroneous deductions claimed for contributions from shareholders while computing shareholders' profits.
- Misclassification of certain marketing and advertising expenses in financial statements as admissible expenses when calculating the taxable surplus in the Policyholder's Account.
HDFC Life's proactive approach in addressing the income tax demand and its commitment to rectification reflect its focus on regulatory compliance and maintaining transparency with stakeholders. As the company navigates this situation, investors and market observers will be closely monitoring the developments surrounding this tax issue.
CAclubindia
