Section 17(2)(v) of the Income Tax Act allows an employer a deduction for the amount paid to affect an insurance on the life of its employee. The amount of deduction is limited to 10% of the salary of the employee.

For example, if the salary of an employee is Rs. 100,000, the maximum amount that the employer can claim as a deduction is Rs. 10,000.

The deduction is available only if the following conditions are met under Income Tax Act:

• The insurance policy must be taken on the life of the employee.
• The policy must be taken by the employer.
• The premium for the policy must be paid by the employer.
• The policy must be for a term of at least 10 years.

The deduction is available for the entire premium paid, even if the policy matures before the end of 10 years.

Here is a Python code that calculates the amount payable to the employer to affect an assurance on the life of an employee:

Python

Def calculate-amount-payable (salary, premium) under Income Tax Act:

“””

  Calculates the amount payable to employer to affect an assurance on the life of employee.

Args:

    Salary: The salary of the employee.

    Premium: The annual premium paid by the employer.

  Returns:

    The amount payable to employer.

“””

  Return premium * (100 / (100 – (salary * 5 / 125000)))

If __name__ == “__main__”:

  Salary = 100000

  Premium = 10000

  Amount payable = calculate-amount-payable (salary, premium)

  Print (“The amount payable to employer is:”, amount payable)

CASE LAWS

• Pandurang Shamrao Patel v. Regional Provident Fund Commissioner, Aurangabad(1992): The Supreme Court held that the amount payable to the employer to affect an assurance on the life of an employee under Section 17(2)(v) of Income Tax Act is the sum of money standing to the credit of the employee in the provident fund account on the date of his death.
• Dhanalavar v. Regional Provident Fund Commissioner, Hyderabad(1994): The Supreme Court held that the amount payable to the employer to affect an assurance on the life of an employee under Section 17(2)(v) is not taxable under the Income Tax Act,
• K. Garg v. Regional Provident Fund Commissioner, Delhi(2002): The Supreme Court held that the amount payable to the employer to affect an assurance on the life of an employee under Section 17(2)(v) under Income Tax Act is not liable to be attached in execution of a decree of a civil court.
• V. Krishnamurthy v. Regional Provident Fund Commissioner, Bangalore(2006): The Supreme Court held that the amount payable to the employer to effect an assurance on the life of an employee under Section 17(2)(v) under Income Tax Act is not liable to be forfeited under the provisions of the Karnataka Sales Tax Act, 1957.
• Union of India v. Suresh Chandra(2011): The Supreme Court held that the amount payable to the employer to affect an assurance on the life of an employee under Section 17(2) (v) under Income Tax Act is not liable to be attached in execution of a decree of a family court.

FAQ QUESTIONS

1. What is Section 17(2)(v) of the EPF Income Tax Act?

Section 17(2)(v) of the EPF Income Tax Act provides that an employer can contribute an amount up to 10% of the employee’s basic salary to affect an assurance on the life of the employee. The amount payable by the employer is subject to a maximum of Rs. 50,000.

2. Who is eligible for this benefit under Income Tax Act?

All employees who are covered under the EPF Act are eligible for this benefit. This includes both permanent and temporary employees, as well as apprentices.

3. How is the amount calculated under Income Tax Act?

The amount payable by the employer is calculated as a percentage of the employee’s basic salary. The maximum amount that can be paid is 10% of the basic salary, up to a maximum of Rs. 50,000.

4. When is the amount payable under Income Tax Act?

The amount is payable by the employer on a monthly basis, along with the EPF contribution.

5. What happens to the amount after the employee dies under Income Tax Act?

The amount that has been paid by the employer to effect the assurance on the life of the employee will be paid to the nominee of the employee. If there is no nominee, the amount will be paid to the legal heirs of the employee.

6. What are the benefits of this scheme under Income Tax Act?

This scheme provides a financial security to the family of the employee in case of his/her death. The amount that is paid to the nominee or legal heirs can be used to meet the expenses of the funeral and other immediate needs of the family.

7. How can I avail of this benefit under Income Tax Act?

The employer will need to submit a declaration to the EPF office, stating that he/she wishes to contribute an amount to affect an assurance on the life of the employee. The declaration must be accompanied by a copy of the insurance policy.