If insurance premium exceeds 10% of sum assured then on maturity of insurance policy, whether the whole amount is taxable or only some part of the maturity proceeds is taxable.
1 Answers
Hi,
Assuming that the said life insurance policy has been issued after 1.4.2012, of such policy premium payable in any year exceeds 10% of the actual sum assured, then the policy proceeds would be taxable in the hands of the insured. The entire maturity proceeds would be taxable.
With effect from October 1, 2014, TDS at 2% will be deducted by the life insurance company and the remaining maturity amount will be paid to the policy holder. However, no TDS is applicable for maturity value of less than Rs 1,00,000. But still the amount is subject to income tax as per the policyholder's income tax slab rate. Since the income from insurance proceeds is taxed as per slab rates, the policyholder will have to pay the balance tax on such proceeds. Income from proceeds of an insurance policy is taxable under the head, income from other sources. In case if the life insurance company do not have Policy holder's PAN, TDS @ 20% will be deducted. The tax deducted (if any) by the insurance company will reflect in Form 26AS of the policyholder as well as Form 16A provided by the insurance company, which can be used to claim a credit (if any) in the tax return.
With effect from October 1, 2014, TDS at 2% will be deducted by the life insurance company and the remaining maturity amount will be paid to the policy holder. However, no TDS is applicable for maturity value of less than Rs 1,00,000. But still the amount is subject to income tax as per the policyholder's income tax slab rate. Since the income from insurance proceeds is taxed as per slab rates, the policyholder will have to pay the balance tax on such proceeds. Income from proceeds of an insurance policy is taxable under the head, income from other sources. In case if the life insurance company do not have Policy holder's PAN, TDS @ 20% will be deducted. The tax deducted (if any) by the insurance company will reflect in Form 26AS of the policyholder as well as Form 16A provided by the insurance company, which can be used to claim a credit (if any) in the tax return.
thanks sreekanth
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