Insurence claim for Replacement of Asset

[Dinesh Sagade]

What will be the tax treatment for the insurance claim received for the replacement of asset damaged along with the claim received to compensate the loss due to damage ?

AI Summary

Guidance Sought on Taxability of Insurance Claim for Asset Replacement and Loss Compensation Under Income Tax Rules An individual inquired about the tax treatment for an insurance claim received for replacing a damaged asset and compensating for the loss. One respondent advised reversing CENVAT credit proportionately if it was availed, with depreciation deducted at 2.5% per quarter. Another suggested reversing VAT input credit on a prorated basis, typically over three years, and repaying any adjusted credit to the government. The inquirer clarified they sought guidance from an income tax perspective regarding the taxability of the insurance claim for asset replacement and loss compensation.