The Life Insurance Corporation of India (LIC) announced receiving a substantial tax refund of Rs 25,464 crore from the Income Tax Department, spanning seven Assessment Years (AYs) from 2012-13 to 2019-20 (excluding 2015-16). This refund, comprising the principal amount and interest, follows a review by the tax assessment officer triggered by an Income Tax Appellate Tribunal (ITAT) order.
However, the windfall is not without its challenges. LIC has disclosed that it is contending with three income tax demand orders totaling Rs 2,765 crore. The demands pertain to AYs 2011-12, and the seven years covered by the refund, with the largest demand being Rs 1,395.08 crore for AY 2015-16.
The crux of the matter lies in the disallowance of interim bonuses paid to policyholders during the assessment period. Despite ITAT’s directions to reconsider the issue, the tax department disallowed the interim bonus, resulting in a tax effect of Rs 2,133.67 crore for the seven AYs covered by the refund.
LIC, in response to the tax notices, clarified that it intends to file an appeal before the Commissioner (Appeals) while assuring stakeholders that these developments will not significantly impact its financials, operations, or other activities.
It’s noteworthy that the refund, though substantial, has been adjusted downward due to the tax demands, reducing the initial amount of Rs 27,597 crore to Rs 25,464 crore. The interest component of the refund, constituting more than half of the total, will be distributed to policyholders and shareholders in a ratio of 92.5:7.5.
As LIC navigates these tax challenges, the corporation remains resilient, emphasizing the minimal material impact on its overall standing in the financial landscape.
