Thursday, September 1, 2016

Deduction under section 80C

Deduction under section 80C

In case of an individual – Policy should be taken on own life, or life of spouse or any child (Dependent or Independent, married or unmarried). Premium Paid on life of parents, Brother, Sisters or In-laws are not eligible.

In case of HUF – Policy should be taken on life of any member of such HUF

Deduction is allowed only when the premium is actually paid in the year.

Limit on deduction – Maximum deduction allowed for Life insurance premium is 10% of the actual sum assured. For policies issued on or before 31st March, 2012 maximum deduction allowed is 20% of the actual sum assured.

Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—

(a) a person with disability or a person with severe disability as referred to in section 80U, or

(b) suffering from disease or ailment as specified in the rules made under section 80DDB,

maximum deduction allowed for insurance premium is 15% of actual sum assured.

Actual sum assured is the minimum amount assured under the policy on happening of the insured event. The value of any premium agreed to be returned or any benefit by way of bonus or otherwise over and above the sum actually assured which is to be or may be received under the policy by any person is not to be taken into account while calculating actual sum assured.

If the assessee terminates the contract or contract ceases to be in force by reason of failure to pay any premium
in case of any single premium policy, within two years after the date of commencement of insurance; or
in any other case, before premiums have been paid for two years

then no deduction is allowed for any premium paid in that financial year. The premium for such insurance policy which was allowed as deduction in earlier years is taxable in year in which insurance policy is terminated or ceases to be in force.

There is a maximum limit of deduction under section 80C, 80CCC and 80CCDcollectively of rs. 1,50,000.

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