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Tax treatment at the time maturity of life insurance policy

sandhya (student) (121 Points)

17 May 2020

mr.A has life insurance policy of Rs.500000 he paid premium of Rs.400000 , on maturity he received 475000 and the insurance company dedicated TDS u/s 194DA, now what is the taxable income for Mr.A

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suraj zanwar (Student CA IPC / IPCC) (352 Points)
Replied 17 May 2020

While filling your income tax return you should report net maturity proceeds under income from other source that is 500000-400000 it comes to 100000 rs income. And you should claim the tds credit of rs 25000 against tax liability determined while filling his income tax return.

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sandhya (student) (121 Points)
Replied 17 May 2020

If we show only net maturity proceeds of Rs.10000 , then return will be default on the basis of showing lower income , total income showed in return will compare with gross amount in TDS ( gross amount is 500000 as per TDS we show only 10000) this problem will compulsory come

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suraj zanwar (Student CA IPC / IPCC) (352 Points)
Replied 17 May 2020

There is a circular issued by CBDT No.7/2003 Dated 05-09-2003, the extract of which says “the income accruing on such policies (not including the premium paid by the assessee) shall become taxable.”

[Here ‘Such policies’ mean policies not exempt from tax]

SO as per this circular 100000 will be chargeable.

Again a matter come before us, MISMATCH between Form 26 AS & Return filed.

But as regarding what is taxable amount under section 194DA, it will be GROSS AMOUNT RECEIVED DURING A FINANCIAL YEAR FROM LIFE INSURANCE COMPANY NOT EXEMPT UNDER SECTION 10(10D).

Hope this helps…

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sandhya (student) (121 Points)
Replied 17 May 2020

That means is MISMATCH problem not arise?

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 23 August 2020

Incase an assessee receives LIC maturity which is not exempt u/s 10(10D), than [ Maturity Amount less all Premium paid ] by you is taxable as income from other sources. and you can claim TDS which is deducted, in your IT return.

Total/Gross amount is not taxable, only Income portion is taxable.

In your case, Only 1,00,000 is taxable and you can claim 25,000 TDS which deducted, in your IT return