Employer Employee Solution

FAQ’s
 FAQ’s

What if the Employee Leaves?

 If the employer is the owner of the policy (i.e. before the policy is assigned), he
can…
 Surrender (to recover money)
 Assign to the Employee (Life Assured)

 If the policy has been assigned and employee is the owner of the
policy then he can…
 Continue paying premiums (Claim rebate u/s sec 80C)
 Withdraw, surrender, take a loan on the policy
 FAQ’s
When can the policy be assigned?

• Policy can be assigned any time after policy issuance

What would be the tax implication on the surrender

value post assignment , for the employee?

• Post assignment …
• Since the employer CANNOT recover any past premiums paid from the
employee , the surrender value WOULD be taxable in the hands of the
employee
 FAQ’s
Will death claim under Employer – Employee scheme be taxed?
• The employer gives a addendum stating that in the unfortunate event of the
employees death, the nominee of the employee as per the employers
records will be given the death benefit.
• As a normal suggested and observed practice, the employer assigns the
policy to the nominee of the deceased employee, and the Life Insurance
company issues the death benefit cheque in the name of the deceased
employees nominee. The death claim thus paid to the nominee of the
employee would be tax free*
*As per CBDT circular 573

Is the employee liable for tax on the premiums paid by the

employer?

• The employee is not liable for tax on the premiums paid by the employer
 FAQ’s
What happens if the company closes operations before
assignment?
• If the operations are getting closed, technically there is a option
for the company to assign the policy to employees.
• In case the policy is not assigned and operations are closed,
then the policy will be deemed to be discontinued ( future
premiums won’t be paid) and since the policy belongs to
company only.

What happens if the company makes losses?

• It has no bearing on assignment or current state of the policy.
 FAQ’s
In case of the death of the employee before the assignment, who
will get the death claim?
• As the policy is not assigned, the death claim is payable to
company.

Is there any supreme court judgement on superannuation taxibility

before occurrence of the contingency
• Reference Supreme Courts judjement
Thank You