CA shilpa shinagare (practicing chartered accountant) (233 Points)
12 January 2012company paying life insurance premium for its empoyee director .the policy is in the name of the company but life asured is empoyee. can the insurance premium paid be allowed as business expenditure.
MD
(AAA)
(117 Points)
Replied 12 January 2012
Hi Shilpa,
Any premium paid by any mode by the assessee as an employer to effect or to keep in force an insurance on the health of its employees is allowed as business expenditure deduction. sec 36(1)(ib)
CA shilpa shinagare
(practicing chartered accountant)
(233 Points)
Replied 12 January 2012
my question is when the policy is in the name of the company and life assured is employee. what will be taxation effect for company and employee? whether still we get deduction u/s 36 or we have to claim it u/s 37 i.e.geneal deduction ?
MD
(AAA)
(117 Points)
Replied 13 January 2012
Hi Shilpa,
Treatment in the hands of employee:
As per proviso (iii) to section 17(2) perquisite does not include:
any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), for the purposes of clause (ib) of sub-section (1) of section 36;
Treatment in the hands of employer:
Any premium paid by any mode other than cash by the assessee as an employer to effect or to keep in force an insurance on the health of its employees is allowed as business expenditure deduction. sec 36(1)(ib).
From the plain reading of the aforesaid provisions it implies that it does not matter if the policy is in the name of employer and the sum assured is the employee.
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