20 January 2016
Sir
I am filing I T Return of client how's income is below BL . but he had realised LIC policy in 2014-15 and TDS is deducted on same amount. wheater is taxable under other sources or not
02 August 2024
When you are dealing with the realization of a LIC policy and its tax implications, here’s how it generally works:
### **Tax Treatment of LIC Policy Maturity Proceeds**
1. **Maturity Proceeds from LIC Policy**: - **Tax Exemption**: Under Section 10(10D) of the Income Tax Act, maturity proceeds from a LIC policy are generally exempt from tax, provided that the policy satisfies certain conditions: - The premium paid does not exceed 10% (for policies issued before 1 April 2012) or 20% (for policies issued on or after 1 April 2012) of the sum assured. - The policy is not a keyman insurance policy. - **Conditions Met**: If the policy meets these conditions, the maturity proceeds are typically exempt from tax and do not need to be included in the income under "Income from Other Sources."
2. **TDS on Maturity Proceeds**: - **TDS Deduction**: If TDS is deducted on the maturity proceeds, it usually means that the insurance company has treated the amount as taxable. This might happen if the policy did not meet the exemption conditions mentioned above.
3. **Filing the Tax Return**: - **Include TDS**: Even if the maturity proceeds are exempt, you should still include the TDS amount in the "Income from Other Sources" section of the tax return. - **Claim Exemption**: You can claim the exemption under Section 10(10D) to ensure that the maturity proceeds are not taxed, despite the TDS deduction.
### **Steps to Handle in Tax Return**:
1. **Report the Maturity Proceeds**: - Enter the maturity proceeds under "Income from Other Sources" in the tax return.
2. **Claim Exemption**: - Claim the exemption under Section 10(10D) in the same section to show that the maturity proceeds are not taxable.
3. **TDS Credit**: - Report the TDS deducted on the maturity proceeds in the “Tax Details” section of the tax return and claim it as a credit against your tax liability.
### **Summary**
- **If the policy meets the exemption conditions**: The maturity proceeds are exempt under Section 10(10D). However, you should include the amount in the return and claim the exemption. The TDS deducted can be claimed as a credit. - **If the policy does not meet the exemption conditions**: The maturity proceeds will be taxable under "Income from Other Sources," and you should pay tax on the amount, less the TDS already deducted.
In any case, ensure that the details are accurately reflected in the tax return and consult with a tax professional if you have specific concerns or additional complexities.
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