Important Point in this regards are given below
- Deduction u/s 80c of income tax is available to Individual and Huf Assessee.
- Maximum total eligible amount under this head (LIFE insurance Premium) is Rs. 1.,00,000 /-
- The limit of one lac as above is total limit u/s 80C for all type of savings ,plus section 80CCC(pension policy) plus u/s 80CCD(Contributory Pension Plan).Means the aggregate amount of deduction under above referred sections can not exceed Rs. 1,00,000.
- If policy taken after 1.4.2003 then Premium paid up to 20% of sum Assured is Eligible for deduction.
- Payment should not be necessarily from income chargeable to tax.
- Minimum Period of holding of policy is Two years ,if policy terminated before two year then all benefit claim taken in earlier year will also be taxable in the year of termination.
- Premium paid is eligible on "payment basis" means deduction is available in the year of payment no matter to which year premium relates to.
- In my opinion late fees paid in addition to premium payable is also eligible for deduction as late payment fees is paid "to keep in force an Insurance".but it is advised not to claim as there are different opinion on this issue.
Ques:Is Assessee eligible to claim benefit for policy taken on his/her children or spouse?
Ans.In case of an individual policy can be taken on
- His own life.
- life of the spouse.(पती या पत्नी )
- any child
One of friend Mr Rajesh Working as sales manager in Reliance Life Insurance asked me,
Is this benefit available evan son (child) is married or not dependent on the assessee?
The answer is yes he can claim.
Assessee can claim tax rebate for payment of insurance premium paid for policy taken on child/spouse even the child is married and child/spouse is not dependent on assessee.
suppose A(father) has taken a Insurance policy on life of his son C who is married with D(wife of C). C is not dependent on his parents (A=father,B =Mother) and paid a premium of first installment Rs 3000 as quarterly installment and second installment is paid by his mother (B) ,third Installment is paid by his wife D and forth installment is paid by his father A.who is eligible for rebate?
In above example all the persons are eligible to claim deduction for rs 3000/- each.My basic aim to tell u that no matter who has taken the policy ,and who is nominee in the policy,if assessee has paid the premium for life insurance premium for policy taken on life of his/her own,life of spouse or any child (married or not,dependent on him/her or not) ,assessee will be eligible for deduction under section 80C.
If in second year In above example let suppose A (father) has paid 2 installments and two installments paid by the son C. who is eligible for deduction?
In this case also A (father) and son C both are eligible for 6000/- each.No matter in previous year rebate for the same policy has been divided in four as above..Means there is no such requirement that deduction are available only to that person who has paid the premium in proceeding year/years.The person who has paid in previous year is eligible and eligible person can be changed every year or in one year there can be more than one persons eligible for premium payment of one policy if they satisfy other condition as discussed above.
lets discuss the above issue with specific section wording from Act.
"In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted........any sums paid or deposited in the previous year by the assessee
(i) to effect or to keep in force an insurance on the life of persons specified in sub-section (4);
(ii) to effect or to keep in force a contract for a deferred annuity, not being an annuity plan referred to in clause (xii), on the life of persons specified in sub-section (4)"
and subsection (4)
(i) in the case of an individual, the individual, the wife or husband and any child of such individual, and
(ii) in the case of a Hindu undivided family, any member thereof;"
So above section says "to effect or to keep in force an insurance "means to keep running the policy taken on relative life and premium is paid by the assessee ,no matter who has proposer ,nominee ,dependent or not,married or not,assessee is eligible to claim deduction.