01 January 2009
On maturity of Keyman Insurance Policy is the proceeds received by Keyman are exempt under under Sec.10(D)???? or Under Keyman Insurance Policy the proceeds are received by the Employer???? Please Explain???
02 January 2009
What is Keyman Insurance? Keyman Insurance is a Life Insurance cover under a suitable Plan of Assurance affected by the company to compensate for the FINANCIAL LOSS suffered following the death of a Key Member or Staff of the Organization. Keyman Assurance does not provide for indemnification of loss incurred but only for the benefits as per the plan of assurance selected.
Purpose of Keyman Cover It provides a financial cushion to the company for: The loss of customers or sales affected by the keyman’s ability and personality. The loss of day-to-day specialised skills. The cost of recruiting and training a suitable replacement. Delay or cancellation of any business project that the keyman is working in. The loss of opportunity to expand in the future. The loss of stable management and good labor relations. Reduction of credit worthiness - recall of loans guaranteed by the keyman.
02 January 2009
Who can be a Keyman? Anybody with specialized skills, whose loss can cause a financial strain to the company are eligible for Keyman Insurance.
For example, they could be:
Directors of a Company Key Sales People Key Project Managers People with Specific Skills
Benefits to the Company Insulate the risk of financial loss against loss of a Keyman. Premiums paid under keyman insurance may be fully allowed as Business Expenses under Section 37(1) of the Income Tax Act, 1961, subject to satisfaction of the assessing authority. Interest on loans taken against a keyman insurance policy may also be allowed as business expenses. Premiums paid by the company on the life of a keyman would not be treated as perquisites in the hands of such a keyman when the company’s request is accepted by the assessing authority. Keyman Insurance policy is a positive measure to improve the retention of the keyman in the company.
Treatment of Payments - for the Company All claims – maturity, surrender or death benefit received by the company are taxable. In case of the keyman retiring, the company may surrender the policy for its cash value, or assign the policy absolutely in favour of the keyman. In case of an assignment, the surrender value of the policy at the time of assignment may be treated as perquisite in the hands of the employee, and taxed accordingly by the assessing authority.
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