Premiums paid for Life insurance – Deduction under Section 80C

  • Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.
  • Eligible Savings: Premiums paid or deposited by assessee to effect or to keep in force insurance on the life of following persons:
    In case of individual assessee – Himself/Herself, spouse, children of such individual
    In case of HUF assessee – any member
  • 20% limit: If the amount of premium paid in a financial year for a policy is in excess of 20% of the actual capital sum assured, then deduction will be allowed only for premiums upto 20% of the sum assured.
  • Limit on amount of deduction: Deduction will be restricted to investments upto Rs 100,000 in savings specified under Section 80C (including life insurance premiums). The limit of deduction under Section 80C will be part of the overall limit prescribed under Section 80CCE.
  • Disallowance: This benefit will be reversed if the policy is terminated/cease to be inforce within 2 years after the date of commencement of policy.

Premiums paid for Pension plans – Section 80CCC

  • Permitted Deduction: Section 80CCC allows for deduction of premiums paid under a pension scheme. As per this Section, the whole of amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of Rs 100,000 is eligible for deduction from the total income.
  • Receipt under Policy: Amounts received on surrender (whole/part) of annuity plan, amounts received as Pension is taxed as income.
  • Limit: The limit of deduction under Section 80CCC will be part of the overall limit prescribed under Section 80CCE.

Overall deduction limit – Section 80CCE

As per this section, the maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC and 80CCD will be limited to Rs 100,000.

Premiums paid for medical insurance – Section 80D

  • Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.
  • Eligible premiums: Premiums paid by assessee by any mode other than cash out of his taxable income to effect or to keep in force an insurance on the health of following persons:
    In case of individual assessee – Himself/Herself, spouse, dependent children and parent or parents. The condition of dependency of parent has been removed from FY 2008-09. In other words, even if the parent is independent, the individual can pay the premium and claim the deduction.
    In case of HUF assessee – any member of HUF
  • Deduction and upper limit: The qualifying amounts under Section 80D for self, spouse and dependent children is upto Rs. 15,000/- and additional deduction upto Rs. 15,000/- for the parents. However, a higher amount of upto Rs 20,000/- is permitted if the person, for whose health insurance the premium was paid, was aged 65 years or more at any time during the financial year in which the premium was paid. Such amounts of premium paid would be allowed as deduction from the total income of the assessee.

Benefits under insurance policy – Section 10(10D)

As per Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax.

However, this rule does not apply to following amounts:

  • sum received under Section 80DD(3), or
  • any sum received under a Keyman Insurance Policy, or
  • any sum received other than as death benefit under an insurance policy which has been issued on or after April 1 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the sum assured.

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0 Comments

  1. S K DASGUPTA says:

    if under any pension plan annuity has started and I have opted for Life pension with return of Purchase Price. Can I surrender the Annuity to receive Purchase price? What are the provisions of IT Act 1961 that govern such surrenders, if allowed?

  2. MANISH KADEL says:

    I am having some doubt regarding the exemption in IT Act U/s 80C and the case are as under –

    1) One employee of our company Paid a Premium under the HDFC Life Sampoorn Samridhi Insurance Plan of Rs. 25000/- with the 5 Years Policy terms and the sum assured is Rs. 87949/-

    Whether we can give full exemption of Rs. 25000/- to the employee under the Section 80C or Not?

    Please reply your clause with Relevant Clause……..

    2) Any one can provide complete details regarding the new changes in IT Act u/s 80C i.e.

    If policy issued on or after 01st Apr 2012 than 10% of sum assured (Sum assured means Minimum Amount assured under the policy without including any Premium agreed to be returned and / or any benefit by way of Bonus)

    Please explain which type of Policy will covered under this clause or can any provide brief explanation of the above clause?

  3. subash Srinivasan says:

    U/s 80C, whatever amount paid to keep the policy alive (other than penalty like late fee n al) is allowed as deduction. The assessee can not pay premium without paying SERVICE TAX. So it’s allowable as deduction u/s 80C. Hence, full amount is elegible for deduction.

  4. CA Dinesh Vijay says:

    Arun your point of view is correct. You can compell your employers to consider the entire amount paid, i.e., premium vis-a-vis the service tax paid thereon.

  5. arun says:

    I’ve a doubt regarding the exemptions in IT ACT u/s 80C.

    I work for AirIndia and my payrolls section says that the Service tax part in any of the tax savings instrument is not considered when shown as investment for exemption u/s 80C.

    I paid Rs. 19,693 towards my Aviva Life insurance annula premium in which the premium part is Rs. 17,854 and the Service tax part on this installment premium is Rs. 1,839.

    My office has given me a benefit for Rs. 17,854 only and they say the Service part wont be considered.
    Same in case of my NPS installments also.
    My point is they should consider the total of it. Am I right or wrong?

    Please clarify and kindly try to give me a supporting document in this regard so that I can show it to them
    Please do the needful.
    Thank you,
    Regards,
    Arun babu
    mobile 93 93 93 4 007

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