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CS Executive · Tax Laws and Practice · Income from Other Sources

Mr. Vivek Shah receives Rs. 6,50,000 under a life insurance policy (not a unit linked policy and not a Keyman policy), and the sum is not excluded under Schedule II (Table: Sl. No. 2). Premiums paid during the term were Rs. 5,00,000, none claimed as a deduction. Assuming the prescribed computation is simply the aggregate of premiums paid, what is taxable under section 92(2)(l) of the Income-tax Act, 2025?

Rs. 1,50,000 is taxable. Under section 92(2)(l), only the part of the life insurance receipt that exceeds the premiums paid and not claimed as a deduction is chargeable. Receipt of Rs. 6,50,000 less premiums of Rs. 5,00,000 leaves Rs. 1,50,000.

  1. ARs. 6,50,000
  2. BRs. 1,50,000Correct
  3. CRs. 5,00,000
  4. DNil

Explanation

Section 92(2)(l) taxes the sum received (including bonus) that exceeds the aggregate premium paid and not claimed as a deduction. Taxable = 6,50,000 - 5,00,000 = Rs. 1,50,000. Taxing the whole Rs. 6,50,000 is wrong since premiums are allowed to be reduced.

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