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Insurance premium for vehicle used for business is tax exempt
April, 03rd 2014

Can I claim tax exemption on the insurance policy I have taken for my scooter?
—Sanjay

If you have income from business and profession and the scooter is used wholly and exclusively for the said business, then the insurance premium paid can be claimed as business expenditure. However, if you do not have income from business or profession, you cannot claim deduction towards scooter insurance payment.

What is the tax treatment on surrender or maturity for unit-linked insurance plans (Ulips)?
—Ipsita Das

The amount received on maturity of an Ulip is exempt from tax under section 10(10D). In respect of insurance policies issued on or after 1 April 2012, the aforesaid exemption is allowed only for policies where premium payable for each year is up to 10% of the sum assured. In case of policies issued between 1 April 2003 and 31 March 2012, the aforesaid exemption is allowed only for policies wherein premium payable for each year is up to 20% of the sum assured.

Accordingly, if these upper limits in terms of the premium are not compiled with, the maturity proceeds shall be taxable in the year of receipt.

I am a government employee and have just received arrears for the past two years. Am I liable for tax deducted at source on the entire amount in this year?
—Murali N.
Salary income is taxable in the year in which it is due or received, whichever is earlier. Hence,, if salary arrears were due, i.e. the amount ascertained and unconditionally payable to you in past two financial years (FYs), it should have been taxed in the past in the respective FYs. But where it can be established that there was an uncertainty on the payment and/or quantum of arrears, the same may be taxable in FY14 on receipt basis, if not already taxed earlier.

Accordingly, the employer would be liable to deduct tax at the applicable income slab rate at the time of payment of salary arrears, and deposit the same into the government treasury within the specified due dates. The higher tax incidence in FY14 owing to salary arrears being taxed in the year of receipt can be mitigated by claiming a relief, as per the prescribed arithmetical formula specified under section 89. There is also a prescribed form to be produced to your employer for this purpose.

Apart from this, you would be required to report the salary arrears along with the taxes deducted at source by the employer in the tax return form. The relief, if any, claimed has to be reported in the schedule titled “relief” of the tax return form to be compliant from disclosure perspective.

 
 
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