Govt. Insures Tax Loophole is Plugged
Employees whohave been assigned keyman Insurance policies taken out by their employers will find the proceeds taxable with the Budget withdrawing benefits under the IT Act.
Such a policy is taken out by a business to compensate for losses that would arise from the death or extended incapacity of a key employee. Prior to 2006, when these policies with maturity benefits were barred by the regulator,many companies took advantage of the tax loophole and availed of such policies. These were subsequently transferred to employees without any consideration as they had zero surrender value.
The employees could then receive the maturity proceeds as tax-free income.
Times of India, New Delhi, 01-03-2013