Your Queries: Income Tax – Maturity proceeds taxable if premium exceeds 10% of sum assured

It has been explicated that the right and ownership of such assessee, in the house, to whatever extent is exclusive.

By Chirag Nangia

I had bought a single premium unit linked plan titled Samridhi Plus of LIC on March 14, 2011 and it matured on March 14, 2021. The single premium paid was Rs 30,000 against the sum assured amount of Rs 40,000. I was paid a maturity amount of Rs 60,109. Is the maturity amount fully taxable?
—Arup Majumdar
As per the Income Tax Act, any sum received under a life insurance policy is exempt from tax if premium payable for any of the years during the term of the policy is less than 10% of the capital sum assured. Here, the premium exceeds 10% of capital sum assured and so, the maturity proceeds is taxable in the year of receipt (i.e. FY 2021-22). Notably, TDS has not been deducted as the maturity proceeds are less than Rs 1 lakh.

I sold unlisted equity shares and received LTCG of Rs 5 lakh in FY21. In FY20, I claimed exemption u/s 54F against sale of a long term capital asset. Am I eligible to claim exemption of the LTCG u/s 54 EC in FY21?
—N A Viswanathan
Section 54EE remains inoperative as the ‘long term specified assets’ have not been notified, resultantly exemption under the section cannot be claimed. Further, Section 54F imposes a restriction on purchase of another residential house (other than the one for which exemption is claimed) within one year from the transfer of the original asset.

Can an assessee seek relief under Section 54F taking the view that he has only ‘one residential house property’ and the joint one belongs to wife?
—G Krishna Warriar
One of the conditions to claim the benefit of exemption under Section 54F is that on the date of transfer of the asset, the taxpayer should not own more than one other residential house (other than the new property). Despite favourable rulings of the Tribunal, the claim for deduction under section 54F has been rejected by High Courts, where the assessee, on date of sale of long term capital asset, owns a residential house, even jointly with another person. It has been explicated that the right and ownership of such assessee, in the house, to whatever extent is exclusive. Therefore, conservatively, it is advised to not claim the deduction.

The writer is director, Nangia Andersen India. Send your queries to fepersonalfinance@expressindia.com