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Taxablity of Insurance claims

kranthi (abc) (42 Points)

22 April 2010

Dear Experts,

Asessee pays Rs. 2500 as a premium on the life of their parents (dependents) from some time and Assessee is the nominee. They died in an accident and the Assessee gets the insurance claim of Rs. 50,00,000 In this case, what is the taxability of that income???

Another case, If Assessee did not pay the insurance premium on the life of their parents, but Assessee is a nominee for that life insurance plan. In this case, what is the taxability ???

What sections applicable in bothe the above cases. Will these sections come under IPCC May-2010 Exams??????

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3 Replies

Nicky (Chartered Accountant) (245 Points)
Replied 22 April 2010

See to be honest I dont know about IPPC exams sections...

But for taxabillty of Insurance Claims (Life):

When he pays the premium or he doesnot pay the premium, if he is the nominee and he recieves the amount as a nominee it is tax exempt u/s 10(10D) except for a few instances...

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Amir (Learner) (4016 Points)
Replied 23 April 2010

Dear Karthi,

Tax treatment in the hands of receiver is irrespective of the fact whether he has paid insurance premium or not..

As Nicky sir said - Receipt of Insurance claim on Death is "Tax Exempt" u/s 10(10D) except in the circumstances mentioned there only -

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 shall not apply to any sum received on the death of a person:

Provided further that for the purpose of calculating the actual capital sum assured under this sub-clause, effect shall be given to the [Explanation to sub-section (3) of section 80C or the Explanation to sub-section (2A) of section 88, as the case may be]