I bought LIC’s Bima Bachat Plan 175 on 9 December 2013 after paying a single premium of ₹100,155. The time period of the plan was 9 years and the sum assured ₹1.5 lakh. As payouts, I bought ₹22,500 in 2016 and ₹22,500 in 2019.
The maturity proceeds of ₹1,13,580 was given on 9 December 2022. It included a remaining bonus of ₹16,500, whereas ₹3,075 was deducted as tax beneath part 194DA.
In my Form 26AS, LIC has mixed all of the payouts ( ₹61,500) for FY2022-23, the yr of coverage maturity. I’m unsure whether or not this consolidated quantity needs to be included in my earnings tax return (ITR) for the present fiscal.
If it needs to be included, what’s the quantity to be proven within the ITR and which ITR type is relevant right here?
—Name withheld on request
We perceive that you just had bought a life insurance coverage coverage from LIC (within the nature of pure life insurance coverage) in 2013 and had made a one-time premium cost of ₹100,155 in the direction of buying this coverage. As per the proviso to part 10(10D) of the Income-tax Act, 1961, any sum obtained beneath a life insurance coverage coverage, together with the sum allotted by the use of bonus on such coverage, shall be taxable the place coverage is issued on or after 1 April 2012 and the premium payable in any of the yr through the coverage time period, exceeds 10% of the sum assured.
In the moment case, the one-time premium of ₹100,155 exceeds the brink of 10% of sum assured (being ₹1.5 lakh). Thus, the sum obtained beneath the topic coverage shall be taxable in your palms and no deduction beneath part 80C of the Act, is offered in the direction of the premium paid.
We perceive that you’ve got obtained gross maturity proceeds from the coverage amounting to ₹1,61,655 (over FY2016-17, FY2019-20 and FY2022-23). Tax deducted at supply (TDS) of ₹3,075 has been effected by LIC in FY 2022-23.
In such case, the distinction between the gross maturity proceeds obtained by you beneath the coverage and the full premium paid (general amounting to ₹61,500), needs to be taxable as ‘income from other sources’ in your palms.
The proportionate taxability arose within the respective monetary years when the respective maturity proceeds have been obtained by you. It is assumed that the identical was accordingly supplied to tax within the earlier years. As the gross proceeds obtained by you in FY2022-23 is ₹116,655 (i.e. maturity proceeds of ₹113,580 plus TDS of ₹3,075), the identical could also be supplied to tax in FY 2022-23, beneath the pinnacle “earnings from different sources”. The premium paid could also be offset on a proportionate foundation/ to the extent not claimed earlier.
As TDS has been deducted by LIC in FY2022-23 solely, all the TDS credit score of ₹3,075 might accordingly be claimed in FY2022-23. Please observe that in case the web earnings supplied in FY2022-23 is decrease than the taxable quantity reported by the deductor, full TDS credit score could also be challenged by the tax authorities, which might then should be defined foundation the information and documentation.
Please observe that applicability of the ITR type is determined by numerous different elements, akin to tax-payer’s residential standing, nature of earnings, sort of property held, and many others. through the yr. Assuming you’re in any other case required to fill ITR-2 for FY 2022-23, the stated earnings needs to be disclosed beneath Schedule OS-income from different sources.
Parizad Sirwalla is associate and head, international mobility providers, tax, KPMG in India.
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Updated: 27 Aug 2023, 09:47 PM IST
