New Delhi— Interestingly, the Income Tax Department sent HDFC Life Insurance Company a Rs 1,495.17 crore tax demand for 2021–2022. The demand includes Rs 592.41 crore in interest. To correct mathematical flaws in the tax demand calculation, the life insurer will file a rectification application.
Details of Tax Demand and Firm Response
As of June 28, HDFC Life’s stock market regulatory filing estimates the tax demand at Rs 1,141.09 crore. The corporation informed the tax authorities of mathematical flaws in the tax demand and is applying for correction. There are mathematical mistakes in tax demand calculations. The company is applying for tax correction. According to the regulatory filing, the adjusted tax demand after the rectification order will be Rs 1,141.09 crore, and interest will be recalculated accordingly.
The tax demand notice stated that HDFC Life misclassified shareholders’ net investment income as “Income from Other Sources,” failed to include “Negative Reserves” in the taxable surplus, and incorrectly deducted shareholder contributions from shareholders’ profit. In their financial statements, the corporation wrongly admitted some marketing and advertising charges as permitted when calculating the policyholder’s taxable surplus.
Result and Next Steps
On the NSE, the company’s shares fell 0.07 percent to Rs 593.65 after the statement. Despite the tax demand, HDFC Life said it will appeal to the Appellate Authority and that the order will not adversely damage its financial operations. The company noted that the Income Tax Appellate Tribunal, Mumbai, and the Commissioner of Income Tax (Appeals) have addressed key assessment order matters.
Legal precedents and history
HDFC Life has responded to tax demand issues in previous years to its advantage. The company disclosed their legal disputes on August 14 and November 9, 2023. These precedents suggest HDFC Life should rectify and maybe reduce tax demand.
Results
The Income Tax Department’s tax demand has highlighted HDFC Life Insurance’s financial controls. This occurrence underlines the importance of meticulous financial recordkeeping and tax compliance, even though the company is certain it can fix the errors and decrease the tax obligation. HDFC Life Insurance’s tax liability will depend on the appeal and corrective application.
