HDFC Life Insurance gets a tax demand of Rs 1,495 cr from I-T dept

HDFC Life Insurance on Friday said it has received a tax demand of Rs 1,495.17 crore from the Income Tax department for the assessment year 2021-22, according to an exchange filing. The tax demand also includes a demand of Rs 592.41 crore as interest.

The tax authorities said that the company had not considered ‘Negative Reserves’ as part of the taxable surplus, shareholders’ net investment income was classified as income from life insurance business and not as ‘Income from Other Sources’. Contributions from shareholders were incorrectly claimed as deductions while calculating shareholders' profit.

The company had certain marketing and advertising expenses in financials that were considered as admissible expenses incorrectly while calculating the taxable surplus in the policyholder's account.

According to the life insurer, there are arithmetical inaccuracies in the tax demand calculation and the company will file a rectification application before the tax authorities. Post rectification order, a tax demand application will be made for nearly Rs 1,141.09 crore, the company said.

“While calculating the tax demand there are arithmetical inaccuracies involved. The company is in the process of filing a rectification application before the tax authority. Post passing of the rectification order, the rectified tax demand shall be approximately Rs 1,141.09 crore and interest shall be recomputed accordingly,” according to the exchange filing.

The company said that major issues raised in the assessment order are covered by orders of the Income Tax Appellate Tribunal, Mumbai and Commissioner of Income Tax (Appeals) in its own case for earlier years which was already disclosed vide disclosure of pending litigations or disputes made on August 14, 2023, and November 9, 2023, respectively.