Key Man Policy

This query is : Resolved

paras mal jain (Querist)
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05 November 2008 Our Company takan Key Man Policy in name of our director and claim in income tax return

thereafter scrutiny case was selected for assessment and Learned assessing authority ask to me for disallowances of kay man policy takan in the name of our director

Paras mal jain

CA Bosu babu

CA Bosu babu (Expert)
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05 November 2008 IS THE premium paid on keyman insurance policy deductible as a business expenditure assuming it is well within the limit of 20 per cent of the policy amount? - Aashish Desai, Baroda

Yes, because keyman insurance policy is unique to businesses and professions. It is deductible under the omnibus Section 37(1). That it is a business expenditure is further reinforced by the fact that clause (vi) of Section 28 specifically ropes in any amount received under a keyman insurance policy as income from business or profession as the case may be. If a receipt is a business income, the corresponding expenditure to earn the same ought to be allowed as a business expenditure. The Government came down hard on single insurance policies and restricted the premium allowable for tax purposes to 20 per cent last year. But this was under Section 88. A business would remain unaffected by this amendment.

What applies to personal taxation does not automatically extend to business taxation.