HDFC Life Insurance Faces Tax Demand; Plans For Rectification And Appeal

HDFC Life Insurance Faces Tax Demand; Plans For Rectification And Appeal

The tax demand for the assessment year 2021-22 i.e financial year 2020-21 is substantial, totaling Rs 1,495.17 crore with an additional interest of Rs 592.41 crore.

Oliviya KunjumonUpdated: Friday, June 28, 2024, 02:24 PM IST
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HDFC Life Insurance Faces Tax Demand; Plans For Rectification And Appeal/ Representative Image |

HDFC Life Insurance Company Limited on Friday, June 28, through a BSE exchange filing announced that the company has received an Income Tax Order from the Assistant Commissioner of Income Tax, Central Circle 6(2), Mumbai on June 27, 2024.

"The tax demand and applicable interest has been incorrectly computed by the Department and the Company is in the process of filing a rectification application before the Tax Authority. The Tax demand and interest mentioned in the said Order would be reduced post passing of the rectification Order by the Tax Authority," the company said in the exchange filing.

Tax Demand and Discrepancies

The tax demand for the assessment year 2021-22 i.e financial year 2020-21 is substantial, totaling Rs 1,495.17 crore with an additional interest of Rs 592.41 crore.

HDFC Life contends that these amounts are inflated due to arithmetical errors made by the tax department. The company is currently in the process of filing a rectification application to correct these inaccuracies.

Post passing of the rectification order, the rectified tax demand is expected to be around Rs 1,141.09 crore, with interest being recomputed accordingly.

As per the regulatory filing, the company added that the tax order alleges several violations

As per the regulatory filing, the company added that the tax order alleges several violations |

Allegations and Major Issues

As per the regulatory filing, the company added that the tax order alleges several violations, which includes:

- Negative reserves not included in the taxable surplus.

- Misclassification of shareholders' net investment income.

- Incorrect claims of certain incomes as exempt under Section 10.

- Improper deduction claims related to shareholders' contributions.

- Failure to apply proportionate disallowance as per Section 14A.

- Incorrect consideration of certain marketing and advertising expenses as admissible.

Shares performance

The shares of the company on Friday at 2:16 pm IST were trading at Rs 594.15, up by 0.16 per cent.

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