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CA Final · Direct Tax Laws & International Taxation · Income from Other Sources

Arvind receives Rs. 12,00,000 on maturity of a life insurance policy, which is not a unit linked policy and not a Keyman policy. The sum is not excluded under Schedule II (Table: Sl. No. 2). Total premiums paid during the term were Rs. 9,50,000, of which Rs. 1,50,000 was claimed as a deduction under the Act in earlier years. Applying section 92(2)(l) (premium computation as prescribed taken as the premium actually paid), what is the income from other sources?

Rs. 4,00,000 is chargeable. Only premiums not claimed as a deduction are subtracted from the sum received. Premium not claimed is Rs. 9,50,000 less Rs. 1,50,000, which is Rs. 8,00,000, and Rs. 12,00,000 less Rs. 8,00,000 leaves Rs. 4,00,000.

  1. ARs. 2,50,000
  2. BRs. 4,00,000Correct
  3. CRs. 12,00,000
  4. DRs. 1,00,000

Explanation

Section 92(2)(l) taxes the sum received exceeding the aggregate premium paid and not claimed as a deduction. Premium not claimed as deduction = Rs. 9,50,000 - Rs. 1,50,000 = Rs. 8,00,000. Taxable = Rs. 12,00,000 - Rs. 8,00,000 = Rs. 4,00,000. Deducting the full Rs. 9,50,000 gives Rs. 2,50,000, which wrongly ignores that premium already claimed as a deduction is not allowed again.

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