Employer & Employee Insurance Scheme.
This query is : Resolved
05 April 2009
The scheme says that the premimum paid by the Company for the Life Insurance cover on the life of their Employee will be exempt from tax u/s 37(1) and the maturity proceeds will also be tax free in the hands of the Employee U/s 10(10)D.
Please be kind enough to enlighten me weather the above sections are correct or not.
Please clarify
Awaiting your reply.
Please be kind enough to enlighten me weather the above sections are correct or not.
Please clarify
Awaiting your reply.
06 April 2009
u/s 37(1) payment made for insurance premium is allowed as a expenditue but in other side u/10(10)D insurance proceed receied by the policy holder is exampt from whole tax if certanin condition are being satisfied. Thank you
06 April 2009
Dear Rajesh,
Please be kind enough to clarify a bit more regarding the sec 10(10)D.
Please be kind enough to clarify a bit more regarding the sec 10(10)D.
06 April 2009
Dear Rajesh,
Please be kind enough to clarify a bit more regarding the sec 10(10)D.
Please be kind enough to clarify a bit more regarding the sec 10(10)D.
21 July 2024
The sections mentioned pertain to specific provisions of the Income Tax Act, which govern the tax treatment of premiums paid by employers for life insurance cover on the lives of their employees, as well as the tax treatment of maturity proceeds in the hands of the employees. Here’s a clarification on the sections mentioned:
### Section 37(1):
- **Exemption of Premiums Paid by Employer:** Section 37(1) of the Income Tax Act deals with deductions allowed for business expenses. It allows for deduction of any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the taxpayer) laid out or expended wholly and exclusively for the purposes of the business or profession.
- **Applicability to Employer-Paid Premiums:** If an employer pays premiums for a life insurance policy covering its employees and the purpose is to facilitate the business (e.g., to provide employee benefits), such premiums may be considered as a business expense deductible under section 37(1). This means the employer can deduct these premiums as an expense while calculating their taxable income.
### Section 10(10D):
- **Tax Exemption on Maturity Proceeds:** Section 10(10D) of the Income Tax Act provides for tax exemption on any sum received under a life insurance policy, including bonus, provided the premium paid in any year does not exceed 10% of the sum assured. This exemption applies to maturity proceeds received under life insurance policies.
- **Conditions for Exemption:** To qualify for exemption under section 10(10D):
- The insurance policy must be in the name of the employee.
- The premium paid must not exceed 10% of the sum assured for policies issued after 1st April 2012 (for policies issued before this date, the premium must not exceed 20% of the sum assured).
- The policy must have been in force for a minimum period (usually specified as two years for policies issued on or after 1st April 2013).
### Clarification:
- **Premiums Paid by Employer (Section 37(1)):** Yes, premiums paid by the employer for life insurance cover on the lives of their employees can generally be claimed as a deduction under section 37(1) of the Income Tax Act, provided they are incurred wholly and exclusively for the purposes of the business.
- **Tax Exemption on Maturity Proceeds (Section 10(10D)):** Yes, maturity proceeds received by the employee under a life insurance policy are exempt from tax under section 10(10D), subject to the conditions mentioned above.
### Conclusion:
The statements regarding the applicability of sections 37(1) and 10(10D) of the Income Tax Act to employer-paid premiums and maturity proceeds of life insurance policies are correct. Employers can deduct the premiums paid as a business expense under section 37(1), and employees can avail tax exemption on maturity proceeds under section 10(10D), provided all conditions are met.
It’s advisable for employers and employees to verify these provisions with a tax advisor or chartered accountant to ensure compliance with all applicable rules and to maximize tax benefits legally available under the Income Tax Act.
### Section 37(1):
- **Exemption of Premiums Paid by Employer:** Section 37(1) of the Income Tax Act deals with deductions allowed for business expenses. It allows for deduction of any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the taxpayer) laid out or expended wholly and exclusively for the purposes of the business or profession.
- **Applicability to Employer-Paid Premiums:** If an employer pays premiums for a life insurance policy covering its employees and the purpose is to facilitate the business (e.g., to provide employee benefits), such premiums may be considered as a business expense deductible under section 37(1). This means the employer can deduct these premiums as an expense while calculating their taxable income.
### Section 10(10D):
- **Tax Exemption on Maturity Proceeds:** Section 10(10D) of the Income Tax Act provides for tax exemption on any sum received under a life insurance policy, including bonus, provided the premium paid in any year does not exceed 10% of the sum assured. This exemption applies to maturity proceeds received under life insurance policies.
- **Conditions for Exemption:** To qualify for exemption under section 10(10D):
- The insurance policy must be in the name of the employee.
- The premium paid must not exceed 10% of the sum assured for policies issued after 1st April 2012 (for policies issued before this date, the premium must not exceed 20% of the sum assured).
- The policy must have been in force for a minimum period (usually specified as two years for policies issued on or after 1st April 2013).
### Clarification:
- **Premiums Paid by Employer (Section 37(1)):** Yes, premiums paid by the employer for life insurance cover on the lives of their employees can generally be claimed as a deduction under section 37(1) of the Income Tax Act, provided they are incurred wholly and exclusively for the purposes of the business.
- **Tax Exemption on Maturity Proceeds (Section 10(10D)):** Yes, maturity proceeds received by the employee under a life insurance policy are exempt from tax under section 10(10D), subject to the conditions mentioned above.
### Conclusion:
The statements regarding the applicability of sections 37(1) and 10(10D) of the Income Tax Act to employer-paid premiums and maturity proceeds of life insurance policies are correct. Employers can deduct the premiums paid as a business expense under section 37(1), and employees can avail tax exemption on maturity proceeds under section 10(10D), provided all conditions are met.
It’s advisable for employers and employees to verify these provisions with a tax advisor or chartered accountant to ensure compliance with all applicable rules and to maximize tax benefits legally available under the Income Tax Act.
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