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

Kavita Rao, a resident individual, received Rs. 5,00,000 on maturity of an ordinary (non-unit linked) life insurance policy, including bonus. The premiums she paid over the policy term total Rs. 3,20,000, none of which was claimed as a deduction, and assume the sum is not excluded under Schedule II (Table: Sl. No. 2). Under section 92(2)(l) of the Income-tax Act, 2025, what is chargeable under Income from other sources?

Rs. 1,80,000 is chargeable. Under section 92(2)(l), the amount received on a non-ULIP life policy that is not otherwise excluded is taxed only to the extent it exceeds premiums paid and not claimed as deduction. Rs. 5,00,000 less Rs. 3,20,000 gives Rs. 1,80,000.

  1. ARs. 5,00,000
  2. BNil
  3. CRs. 1,80,000Correct
  4. DRs. 3,20,000

Explanation

Section 92(2)(l) charges the sum received, including bonus, exceeding the aggregate of premium paid and not claimed as deduction. 5,00,000 - 3,20,000 = Rs. 1,80,000. Taxing the full Rs. 5,00,000 ignores the premium reduction, and Rs. 3,20,000 wrongly taxes the premium itself.

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