Letter Addressed to Finance Minister-Deduction of Income Tax

letter to finance minister regading Deduction of Income Tax

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.

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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

sd/-

   Secretary General

posted by Secretary,LIAFICoimbatore Division on 29/11/2014 at 1PM