Premiums Paid for Life Insurance by the Insured

November 5, 1958 BIR RULING NO. 668-58 Mr. Manuel de los Reyes #71 East 14th Street East Tapinac Olongapo, Zambales S i r : In reply to your letter dated May 20, 1958, I have the honor to inform you as follows: LexLib 1. Premiums paid for life insurance by the insured are not deductible for they are personal expenses. 2. The contributions made by an employee to retirement funds or social security which are deducted from the salary of an employee are considered parts of his gross income, and not deductible because they constitute personal expenses. However, the contributions made by the company of a covered employee should not be excluded from its gross income but the same can be claimed as business expenses, deductible under Section 30(a) (1) of the Tax Code. 3 & 4. The proceeds of life insurance policies paid to beneficiaries upon the death of the insured, whether in single sum or otherwise is excluded from gross income but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income. The amount received by the insured, as a return of premium or premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract is not to be included in gross income. Any amount received by the insured in excess of the actual premiums paid is, however, subject to tax. The proceeds of a life insurance policy received by any beneficiary designated in the policy of insurance where the insured reserves to himself the power to change or revoke the name of the beneficiary during his lifetime, whether or not he has, during his lifetime, exercised such power of revocation, form part of the gross estate of the decedent in accordance with Section 88 (e) of the Tax Code, and therefore subject to estate and inheritance taxes. 5. Prize winners in sweepstakes are exempt from the payment of income tax pursuant to Republic Act No. 1169. Likewise, such prizes are not subject to the additional residence tax, the same not being comprised within the term "gross receipts or earnings derived by a person from its business" in contemplation of Section (1) (b) of the Residence Tax Law (Com. Act No. 465). (B.I.R. Ruling, December 24, 1957) Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue