My son is doing PhD in a university in the US for which he gets scholarship. He wants to send some amount out of his scholarship money for my domestic expenses in India. Will that be taxable in my hands? What is the taxability of payout on maturity of a life insurance policy issued before April 1, 2003?

TG Venkateswaran

As per Section 56(2)(x) of the Income Tax Act, a sum of money received from a relative will not be considered as income in hands of the recipient. For the purpose of this section, the word ‘relative’ includes a lineal ascendant/descendant of the individual. We understand that you will be receiving money from your son (who qualifies as a ‘relative’). Therefore, such receipt will not be considered as taxable in your hands.

Further, as per Section 10(10D) of the I-T Act, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, should be considered exempt in the hands of the recipient. However, the same doesn’t include the following:

i) any sum received under ‘Keyman insurance policy’; or

ii) any sum received under Section 80DD (3) or under Section 80DDA (3) of the I-T Act; or

iii) any sum received under an insurance policy issued after April 1, 2003, and on or before March 31, 2012, in respect of which the premium payable for any year exceeds 20 per cent of the actual capital sum assured; or

iv) any sum received under an insurance policy issued after April 1, 2012, in respect of which the premium payable for any year exceeds 10 per cent of the actual capital sum assured.

In light of the above, the payout received by you now on maturity of a life insurance policy which was issued before April 1, 2003, shall be exempt from tax in your hands.

The writer is a practising chartered accountant.

Send your queries to taxtalk@thehindu.co.in

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