I had single premium life insurance coverage for Rs. 1,50,000 on 5/19/11 for ten years. The coverage is due on 05/19/21. The maturity worth was Rs. 3.30,000 / -. The insurance coverage firm has deducted 10% tax on the quantity due. My query is whether or not I ought to rely on the gross quantity of Rs. 3.30,000 or the distinction of Rs. 1.80,000 / -?

The due proceeds of a life insurance coverage are exempt in accordance with ยง 10 Abs. 10d Revenue Tax Act, supplied that the premium paid for the life insurance coverage is 10% of the sum insured for one 12 months through the premium cost interval for the insurance policies that had been issued after April 1st, 2012. For insurance policies issued between April 1, 2003 and March 31, 2012, the higher premium restrict is 20% of the sum insured. There have been no such premium restrictions for insurance policies issued earlier than April 1, 2003. Any quantity claimed as a demise, whatever the premium paid, is totally tax-free.

For the reason that insurance coverage firm deducted the withholding tax, I believe that the premium paid for the only premium exceeded 20% of the sum insured, because the coverage was taken out between April 1, 2003 and March 31, 2012. As to your query in regards to the quantity of taxable quantity, there isn’t a clear regulation in revenue tax legislation from the due quantity you acquired, however for my part the complete due proceeds can’t be taxed and solely the distinction between the premium paid and the due proceeds needs to be taxed . Conclusions may be drawn from the availability launched within the 2021 price range for the taxation of Unit Linked Insurance coverage Polices (ULIP) with an annual premium of greater than 2.50 lakhs per 12 months. The amended provisions stipulate that solely the distinction and never the complete time period proceeds of ULIPs needs to be taxed.

As a result of the amended rules deal with ULIP insurance policies as investments and tax the maturity proceeds accordingly, you possibly can deal with the premium you pay as an funding and even apply the good thing about indexing to the premium paid and calculate long-term capital features accordingly. Bearing in mind the associated fee inflation index for each years, the taxable long-term capital acquire is Rs. 71,576 / – and taxes @ 20% on this are Rs. 14,315 / – decrease than the precise tax deducted at supply and thus you may get the overpaid tax refunded. A phrase of warning: the tax officer might or might not agree with my declare that the premium paid is handled as an funding.

Balwant Jain is a tax and funding skilled and may be reached on Twitter at [email protected] and @jainbalwant.

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