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Maturity proceeds of insurance are not subject to tax
November, 15th 2013

I am working in Singapore and planning to buy an insurance policy here which will mature in 15 years. I intend to relocate to India in another seven years. Will there be any tax implications as it will mature when I am in India?

—George Mathew

When your policy matures you will be a resident of India and your income as a resident will be taxable. Hence, your global income will be liable to tax in India.
The maturity proceeds of the insurance policy would be subjected to tax in India as per the then applicable provisions of the Indian Income-tax Act.
As per the current provisions of the Act, there is an exemption under section 10(10) in respect to maturity proceeds of a life insurance policy subject to the condition that the annual premium payable does not exceed 20% of the sum assured.

Though section 10(10) does not require the policy to be issued by an Indian insurance company; the tax department may take such a view in which case there could be some litigation. However, there is a decision of the Mumbai Tribunal in the case of Taragauri T. Doshi vs the income tax office where it has been held that the maturity proceeds of a life insurance policy issued by a foreign insurer is exempt from tax.

I was in Peru for my post-doctorate research for two and half years. During this period I didn’t filed my income tax returns. Will I have to pay a big penalty due to this?
—John D’Souza

The due date for filing income tax returns for an individual who does not have any business income liable to tax audit is 31 July following the end of the financial year for which the return is to be filed.

You are required to file your income tax return if you have gross total income exceeding the maximum amount not liable to tax, or you have incurred losses which you want to carry forward for future set off, or you are claiming an income tax refund. The maximum amount not liable to tax for the financial years 2012-13 and 2013-14 is Rs.2 lakh. If your Indian income is lower than this, it’s not mandatory to file returns. If tax returns are filed after the due date, interest is payable on the amount of unpaid tax. Also, if the return of income is not filed within one year of the end of the financial year you may be charged a penalty of Rs.5,000, at the discretion of the assessing officer.
If you are claiming a refund, you will not be eligible for receipt of interest on refund for the period of delay in filing the return. Belated return of income can be filed suo moto within two years from the end of the financial year. If the return of income is not filed, and the tax department issues a notice asking an assessee to file it, in addition to payment of unpaid tax and interest, there would also be a penalty on the unpaid tax.

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