SAVING CORPORATE INCOME TAX BY PAYING PREMIUM FOR DIRECTORS,EMPLOYEES

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Kashyap Vyas (Querist)
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28 October 2007 My question is whether any Pvt/Pub Ltd company can pay Insurance Premium of Directors,Employees,Chairman under Employer Employees Scheme(Not Group Health or any other form of Group Insurance) and get deduction from Profit and Loss Accounts.Is there any limit to debiting of expenses under the scheme.Can corporate select any select band of employees/employee/directors/director for the said insurance scheme.

Please guide me.
E Mail: kashyap@kashyapfinance.com

R.V.RAO

R.V.RAO (Expert)
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28 October 2007 UNDER SECTION 36(1)(ib), OF THE INCOME TAX ACT, A DEDUCTION BY WAY OF INSURANCE PREMIUM CAN BE CLAIMED BY A TAX PAYER IF THE FOLLOWING CONDITIONS ARE SATISFIED.:
1.THE TAX PAYER PAYS A PREMIUM TO KEEP IN FORCE AN INSURANCE ON THE HEALTH OF EMPLOYEES.
2. THE PREMIUM IS PAID BY CHEQUE
3. PREMIUM IS PAID UNDER A SCHEME FRAMED IN THIS BEHALF BY THE GENERAL INSURANCE CORP. OF INDIA, AND APPROVED BY THE CENTRAL GOVT. ( OR WEF ASSESSMENT YEAR 2007-08, UNDER A SCHEME APPROVED BY IRDA).
UNDER SEC 40 (A)(2), IT SHOULD NOT BE EXCESSIVE OR UNREASONABLE .OTHERWISE THE ASSESSING OFFICER MAY DISALLOW THE EXCESS AMOUNTS
AGAIN UNDER SEC 115WB(1),ANY PRIVILEGE, FACILITY,SERVICE,OR AMENITY DIRECTLY OR INDIRECTLY PROVIDED BY EMPLOYER WHETHER BY WAY OF REIMBURSEMENT OR OTHERWISE IS TREATED AS FRINGE BENEFIT AND LIABLE FOR FRINGE BENEFIT TAX,UNLESS THE SAME IS ALREADY TREATED AS PERQUISITE AND TAXED IN THE HANDS OF THE EMPLOYEE.
R.V.RAO