Maturity proceeds from key man insurance are taxable

Written by Suresh Surana | Updated: Dec 3 2013, 13:44pm hrs
I am planning to sell one of my flats to a company. I had built this flat four years ago. What would be the tax implications

Arvind Kumar

The transfer of a flat, which is a capital asset, is subject to capital gains tax in the hands of transferor. As the flat has been held by you for more than 36 months, the gain on its transfer will be treated as a long-term capital gain, taxable at the rate of 20% plus applicable surcharge and education cess. Further, the benefit of indexation shall be available. It is to be noted that under section 50C, if the sale consideration is less than the stamp duty value of the flat, then stamp duty value shall be considered as full value of consideration for the purpose of calculating capital gain. Reinvestment benefit under section 54 can be availed. Further, a new Section imposes an obligation on the buyer of immovable property to deduct tax at the rate of 1% where the total amount of consideration is R50 lakh or more. Accordingly, in case the consideration for the flat is R50 lakh or more, the company shall be required to deduct tax either at the time of making payment or credit, whichever is earlier, at the rate of 1%.

Is the maturity proceeds of key man insurance policy which is assigned to a person during the term of the policy is now taxable

Kapil Sharma

Yes, with effect from FY 2013-14, the benefit of exemption under section 10(10D) shall not be available in respect of a key man insurance policy which has been assigned to any person during its term with or without consideration. Such policies shall continue to be treated as a key man insurance policy and the maturity proceed received by the employee would be taxable as profit in lieu of salary.

During the FY 2012-13, I spent a certain sum on repairs of my residential house out of the loan borrowed from a scheduled bank. Will I get deduction of R1,50,000 while computing the income from house property for FY 2012-13

Anurag Bakshi

Deduction of R1,50,000 in respect of interest paid is available only in a case where loan has been utilised for the purpose of acquisition or construction of house property. However, the said deduction is not applicable where loan has been used for repairs of the house. If the loan is borrowed for repairs or renewal of a house property, then maximum deduction on account of interest is R30,000. Thus, you will be eligible for deduction of R30,000 only.

I have brought forward loss under the head house property. Next month, I am planning to sell some units of mutual funds on which I will have some capital gain. Will I able to set off the brought forward loss of house property against the capital gain on sale of units of mutual funds

DK Gopalan

The brought forward loss under the head Income from house property can not be set off against any income except under the head income from house property. As such, you will not be able to set off the brought forward loss of house property against capital gain on sale of units of mutual funds.

My query is regarding leave travel concession (LTC). I wish to know whether I can claim the exemption in respect of travel expense incurred by my brother.

PS Raghavan

The definition of family for the purpose of LTC includes brothers who are wholly or mainly dependent on the individual. The exemption is not available if the family members are traveling separately without the employee who is not on leave. Also, the exemption is limited to the actual expenses incurred on the journey (which is strictly limited to expenses on air fare, rail fare and bus fare only). Thus, you can claim the exemption limited to the actual expenses incurred on the journey subject to the fact that your brother is wholly dependent on you.

The writer is founder of RSM Astute Consulting Group

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