LIAFI-SG/CG-082/14 26
November 2014
Shri.
Arun Jaitely,
Minister
of Finance,
134,
North Block,
NEW
DELHI-110 001
Respected Sir,
Sub: Deduction of Income Tax at source from Sum Payable under the Life
Insurance Policy in terms of section 194 DA of the Finance Act 2014.
We would like to draw your kind
attention on the cited subject for your kind perusal and necessary action.
Ø Any sum over thresh hold limit of Rs,
One lakh received including bonus under Life
Insurance policies which are not exempted under Section 10 (10-D) of IT Act 1961 would now be subject
to “Deduction of Tax at Source” w.e.f 1-10-2014 @ 2% if policyholder provide
PAN, otherwise it will be 20% on gross amount.
Ø Sum Assured depends on the premium
payable during the term of the policy. This premium is deposited from “post tax
income” of the tax payee policyholder or from “non-taxable income” of the non
tax payee policyholder.
Ø Premium accumulated for years in case
of regular premium policy and single premium in case of single premium policy form
the sum assured. In other words, premium paid during the term of the policy
constitutes the principal i.e., sum assured which should not come under the “head
of Income” and does not chargeable to tax.
Ø What is the provision of the
Constitution of India to levy Income Tax?
“The Central Government has been empowered by entry 82
of the Union list of Schedule VII of the Constitution of India to levy tax on
all income other than agricultural income (subject of Section 10 (1)”.
Ø
The Govt. of
India imposes tax on taxable income of all persons including individuals, HUF,
Companies, and Firms etc. The levy is governed by the Income Tax Act 1961.
-2-
We desire to know whether the
following four points are considered before introducing section 194 DA?
i.
Why Tax is levied
on Sum Payable (Principal) of L.I.C. Policy? Is it not a contradiction of entry
82 of the Schedule VII of the Constitution of India?
ii.
Why the deposits
in Banks are not chargeable to tax in contradiction of TDS in LICI?
iii.
Why Form 15H / G
will not be accepted by LIC discriminating the provision in vogue for exemption
of TDS by Banks?
iv.
How can section
194 DA of Finance Act 2014 be effective with retrospective date of the
commencement of policy from 01-04-2003 or 01-04-2012 as the case may be?
·
People take Life
Insurance Policy sacrificing their present comfort to make provision for their
old age, children education and marriage etc. Many of them do not fall under
tax bracket requiring filing of IT returns. They may not have PAN Card. How
many persons in Rural India have PAN Cards? Now they are compelled to engage
consultants paying fees to them to realize the amount deducted at source by
LICI. Is not injustice?
·
Moreover if
Section 194 DA would not be effective from the retrospective date of
commencement of policy they could opt for not taking policy as was in the case
of “Jeevan dhara” an annuity policy (Plan-96). Annuity of any Annuity policy
and Surrender Value of this policy are subjected to tax. When 100% tax relief
up to yearly Rs.30000/- premium under Jeevandhara
annuity policy was withdrawn the Government had granted an option, if these
policies were surrendered within a stipulated time no tax would chargeable on
the Surrender Value.
·
Introduction of
Sec. 194 DA allows us to believe that the Government discourages people from
taking Life Insurance as security. We feel that popular Government should not
do so.
Sir,
we expect a serious thought would be give non this subject and necessary steps
will be taken to encourage Life Insurance market.
Thanking you, Sir
Sincerely yours,
For
Life Insurance Agents Federation of India
Secretary General
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