Capital Gains in Case of Insurance claim on damage of Capital asset – Section 45(1A)

Capital Gains in Case of Insurance claim on damage of Capital asset Section 45(1A)


What is an insurance claim?

An insurance claim is a formal request by a policyholder to an insurance company for compensation for a covered loss. The insurance company validates the claim (or denies the claim). If approved, payment to insured is made.


With reference to section 45(1A)

If a person receives any money or other assets under any insurance from an insurer on account of –

  • Damage or destruction of an asset, by natural calamities,
  • Riot or civil disturbance,
  • Accidental fire or explosion or
  • By any action taken by enemy (with or without declaration of war)

Then, any profits or gains arising from such receipt shall be taxable as “capital gain” in the year when claim is received.


Let’s understand this with an example:

Mr. A had a property in Shimla and one day on 15th March 2017 it got damaged due to earthquake. Luckily the property was insured by the owner.

He received his insurance claim on 21st June 2021.

Now here the question that arises in everyone’s mind is that the claim is received very late so whether it will be taxable or not?

Answer to this question is yes, it will be taxable in the year when it is claimed i.e., in the year 2021-22.


Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in whatsoever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.


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