CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Nature of Business
Before approving a key-person insurance cover on its director, Vihaan Industries Ltd. studies the tax effect. Under section 26 of the Income-tax Act, 2025, a sum received under a Keyman insurance policy, including bonus allocated on it, is:
The sum received under a Keyman insurance policy, including any bonus allocated, is included in business income. Section 26 specifically lists it, so it is neither exempt nor taxed as capital gains.
- AIncluded in business incomeCorrect
- BTaxed only as capital gains
- CTaxed as income from house property
- DAlways exempt
Explanation
Section 26(2)(i) expressly includes any sum received under a Keyman insurance policy, including bonus allocated, within profits and gains of business or profession. It is therefore not exempt and not capital gains.
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