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

Mrs. Latha Iyer, a resident individual, received Rs. 6,50,000 on maturity of an ordinary 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 over the term total Rs. 5,00,000, none of which was claimed as a deduction under the Act. Under section 92(2)(l) of the Income-tax Act, 2025, what is the amount chargeable under Income from other sources?

Rs. 1,50,000 is chargeable. Under section 92(2)(l), the sum received under a life insurance policy that is not excluded is taxed only to the extent it exceeds the premiums paid and not claimed as deduction, which is Rs. 6,50,000 minus Rs. 5,00,000.

  1. ARs. 6,50,000
  2. BRs. 1,50,000Correct
  3. CNil
  4. DRs. 5,00,000

Explanation

Section 92(2)(l) taxes the sum received, including bonus, to the extent it exceeds the aggregate premium paid and not claimed as a deduction. Here 6,50,000 - 5,00,000 = Rs. 1,50,000. Taxing the full receipt ignores the premium set-off, and Rs. 5,00,000 is just the premium, not the excess.

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