Keyman Insurance Policy | Practical issues I Income Tax Act

• September 12, 2020
• CA Chandan Agarwal's Office

a) Whether the assignee is liable to pay tax on surrender value of Keyman Insurance Policy at the time of assignment or not ?

If answer is affirmative then what is the TDS liability on the Company ?

b) Whether assignee is liable to pay tax on maturity proceeds of Keyman Insurance Policy or not ?

Issue No. 1

Whether the assignee is liable to pay tax on surrender value of Keyman Insurance Policy at the time of assignment or not ? If answer is affirmative then what is the TDS liability on the Company?

Point of View

In respect of the query whether the assignee is liable to pay tax on surrender value of Keyman Insurance Policy at the time of assignment, the Central  Board of Direct Taxation (Herein after called CBDT/Board) has clarified vide its Circular No. 762 dated 18.02.1998 that surrender value of the policy endorsed in favour of the employee to be taken as profit in lieu of salary. In this respect the extract of Circular No. 762 dated 18/02/1998 is reproduced as under:-

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