Employee Employer Insurance- Income Tax treatment, Income Tax

[CABIJENDERKUMAR BANSAL]

One of my client company has paid for insurance policy in the name of directors i.e. employees as a retention tool.

Terms and conditions are as follows:

- Employer is the proposer and life to be assured is the employee. Employer is the policy owner and pays the premium.

-Employer has fixed condition and period by when the policy will be assigned in favor of employee.

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Is the premium paid (annual ₹ 1 lakh) eligible as revenue expenditure under section 37 to the company without any dispute??

now after 4 years of payment by company (Total Payment -Rs.4,00,000 /-), policy got assigned to employee i.e. director in his personal capacity. at that time, surrender value was ₹ 1,75,000 /-. what should be the treatment here in company's hand and in employee's hand?

After that employee pays balance 6 premiums i.e. total ₹ 6,00,000 /- and gets ₹ 12,50,000 /- as maturity amount.

Which amount should be taxable in the hands of employee? total 12,50,000 /- or ₹ 10,75,000 (i.e. net or surrender value at the time of assignment).

Thanks

Posts / Replies

[DR.MARIAPPAN GOVINDARAJAN]

The premium paid may be treated as revenue expenditure since it relates to the business.