CA. Rohit Vishambhari, Vns. (Chartered Accountant) (150 Points)
05 August 2010Taxabilty of amount received from Insurance Co. on account of death by road accident upon the legal heirs under the income tax act.
Whether exempt u/s 10 or chargeable to tax u/s 56(1) i.e. 'Income from Other Sources'.
Give your advice with suitable sections & case laws etc. if any.
Thanks in advance.
Have a nice day!
CA. Rohit Vishambhari, Vns.
(Chartered Accountant)
(150 Points)
Replied 05 August 2010
Dear Dheeraj,
1st Proviso to that clause specifically provides that this clause 10D is not applicable for the sum received on the death of the person.
Yet, thanks for reply.
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 05 August 2010
DEAR ROHIT,
NO SIR, DEDUCTION IS AVAILABLE UNDER SEC 10(10D) OF THE INCOME TAX ACT, 1961.
SEC 10(10D) READ AS UNDER
any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—
(a) any sum received under sub-section (3) of SECTION 80DD or sub-section (3) of section 80DDA*; or
(b) any sum received under a Keyman insurance policy; or
(c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured:
Provided that the provisions of this sub-clause (AND NOT SECTION) shall not apply to any sum received on the death of a person:
Provided that the provisions of this SECTION shall not apply to any sum received on the death of a person:
HOPE THIS SOLVES U'R QUERY.
REGARDS,
MANOJ
CA. Rohit Vishambhari, Vns.
(Chartered Accountant)
(150 Points)
Replied 05 August 2010
Dear Manoj, thanks for your observation.
But still my question remains unsolved, as originally my question was:
whether the sum received on account of claim made under the Motor Vehicle Act for the death occured by a road accident (escaped in original question), not under any life insurance policy taken by the deceased or others in which he was the beneficiary, will attract the liability for Income tax.
Will the answer be different based on the above facts.
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 05 August 2010
DEAR ROHIT,
NOW IT MAKE MORE CLEAR.
NO SPECIFIC EXEMPTION GIVEN UNDER SEC 10. SO THAT IT WILL BE TAXABLE UNDER INCOME FROM OTHER SOURCES.
SECTION 10(10D APPLICABLE ONLY WHEN THE AMOUNT RECEIVED UNDER LIFE INSURANCE POLICY ONLY.
REGARDS,
MANOJ
Harpreet
(* * * * * *)
(1670 Points)
Replied 05 August 2010
wow, great discussion with both of them. The same was information/knowledge for me. Thanks to both of you.
CA. Rohit Vishambhari, Vns.
(Chartered Accountant)
(150 Points)
Replied 05 August 2010
Dear,
My observations are some different i.e. In order to tax any income u/s 56(1), said income has to satisfy the three under mentioned conditions as per the provisions of this section:
> Income should fall within the scope of section 2(24) of the Income Tax Act. (Income Definition)
> Income should not be specifically exempted u/s 10.
> Income should not be covered under item A - H to section 14.
Observations:
1. Questioned income apparently doesn't satisfy the last two conditions.
2. Now, Section 2(24) specifies income includes (i) profits & gains (being the single clause to cover the questioned income).
3. Term "Profits and gains" as interpreted under various judicial pronouncements comments as
> There are two types of receipts i.e. Revenue & Capital Receipts.
> All types of revenue receipts would be taxable unless they are expressly exempt under the act.
> Capital receipts would be taxable if they are covered by section 45 to the act.
Conclusions:
based on the above findings, I think that the questioned income should not be charged for Income Tax.
Additional comments on this are highly welcomed.
CA. Rohit Vishambhari, Vns.
(Chartered Accountant)
(150 Points)
Replied 07 August 2010
Further views on the matter are expected from other members.
So that the question may be concluded.
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