Life insurance maturity tax

Sir,
I invested single premium of Rs 160000/- in Reliance Life Insurane with unit linked plan named Automatic Investment plan during 2008. Sum assured Rs 2 Lakhs. This year 2016 I fore closed and got a Total refund of only Rs 185000/-. the Ins company deducted Rs 1854/- under sec 194DA.            My tax slab is 30%. Kindly workout the balance to be paid? whether it is coming under Long term capital gain tax?
Asked 4 months ago in Income Tax from Chennai, Tamil Nadu
hi,
As per section 194DA of the Income Tax Act, 1961, any sum received by an insured Indian resident from an insurer under a life insurance policy shall be subject to TDS @ 2% if the said sum is not exempted under section 10(10D). This means that policy proceeds exempted under section 10(10D) will be given to the insured without TDS (Tax Deduction at Source). 

If the policies were bought before April 2012, then to claim benefit under 80C and 10(10d), your insurance cover should be at least 5 times of annual premium.

But if your policy is not satisfying these conditions then neither you will get section 80c benefit, nor policy maturity proceeds will be tax free under section 10(10d)

Sum received from insurance policy falls under from from other sources, hence it will not come under capital gain.
you need to add this income to your other sources of income, to arrive at the tax liability. and taking care of all the deductions.
if you have already exhaust all the deduction available under 80c to 80u.
then your tax liabilty on amount received will be 185000*30% -1854 =Rs 53646.



Vishakha Agarwal
CA, Bangalore
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TDS deduction shows that your policy is taxable.  it was purchased before april 2012, then its sum assured should have been atleast 5 times of annual premium. As your sum assured is less then 5 times of the premium amount paid, therefore it is taxable.
your intention of investment was in to invest in life insurance policy. and you have invested in that policy. Insurer have invested that amount in mutual funds for the growth of that investment. As you have not directly invested that amount in equity -debt fund, it will not amount to capital gain.
Vishakha Agarwal
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I think your question is already answered
Shyam Sunder Modani
CA, Hyderabad
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Dear Sir,

Since, your premium was more tha 20% of sum assurd, It's maturity is taxable under the head of other sources @ 30%.

Please feel free to call/ revert in case of any doubts

Thanks and Regards
Abhishek Dugar
CA CS B.Com
Caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
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Hi, 
i have read this, 
it is just saying insurance policies are treated at par with other investment schemes -similar to deposits or bonds
it does not mean that Investment in life insurance policy is treated as capital asset and for taxation purpose it is Capital gain.
you will be taxed on Rs185000.
please find the link below from incometaxindia. gov.in- goto page 12
http://www.incometaxindia.gov.in/Tutorials/Income-from-other-sources-Theoritical.pdf
It will help to clear your doubt on under which head your life insurance proceed would come.- according to direct tax law it would come under income from other sources.

there are two more sites for your reference
http://www.business-standard.com/article/pf/all-you-need-to-know-about-life-insurance-and-its-tax-implications-115052800737_1.html
http://www.financialexpress.com/industry/investor-education/life-cover-proceeds-not-always-tax-free/18211/ 
Vishakha Agarwal
CA, Bangalore
210 Answers
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was your question answered
Shyam Sunder Modani
CA, Hyderabad
955 Answers
4.9 on 5.0
  Talk to Shyam Sunder Modani

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