Budget Series #2- ICAI Budget 2022 recommendations -Section 2(14) – Treatment of LIP as capital asset

Posted on by Business So Simple in Budget, Income Tax

Suggestion

It is suggested that LIP be treated as a capital asset falling within the definition of “property” under section 2(14) of the Act. Indexation benefit (for premiums paid) will take care of inflationary impact – resulting in parity with other capital asset (SUGGESTION FOR RATIONALIZATION OF THE PROVISIONS OF DIRECT TAX LAWS)

Issue: Whether LIP can be regarded as capital asset?

Justification :

Any sum received under life insurance policies (‘LIPs’) not exempt under section 10(10D) are taxable currently. Deduction of only premium while computing the net income / loss after surrender / withdrawal of policy doesn’t take care of inflation resulting in higher taxability.

Published by Business So Simple

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