Sunday, March 18, 2012

AMENDMENT IN SECTION 80C INSURANCE POLICY BUDGET 2012


on Sunday, March 18, 2012


Note:Saving limit has not been increased .further 80CCF Infra bonds saving abolished wef FY 2012-13
Existing
As per sub-section (3) to Section 80C "The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy other than a contract for a deferred annuity as is not in excess of twenty per cent of the actual capital sum assured.
Explanation.—In calculating any such actual capital sum assured, no account shall be taken—
 (i)  of the value of any premiums agreed to be returned, or
(ii)  of 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.
Amendment
In section 80C of the Income-tax Act, with effect from the 1st day of April, 2013,—
 (i)  in sub-section (3), for the words "insurance policy other than a contract for a deferred annuity", the words, figures and letters "insurance policy, other than a contract for a deferred annuity, issued on or before the 31st day of March, 2012," shall be substituted;
(ii)  after sub-section (3), the following shall be inserted, namely:—
'(3A) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity, issued on or after the 1st day of April, 2012 as is not in excess of ten per cent. of the actual capital sum assured.
Explanation.—For the purposes of this sub-section, "actual capital sum assured" in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—
(i) the value of any premium agreed to be returned; or
(ii) 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.'
Analysis/Conclusion
  1. As per Section 80C of the Income-tax Act 1961, in computing the total income of an assessee, being an individual or an HUF, deduction for life insurance premia is allowed.
  2. As per the existing provisions of sub-clause (3) of Section 80C, deduction for life insurance premium shall be allowed for premium or other payment made on an insurance policy which is not in excess of 20% of the actual capital sum assured.
  3. Finance Act 2012 has proposed that the deduction for life insurance premium as regards insurance policies issued on or after 1st April 2012 shall be allowed for premium or other payment made which does not exceed 10% of the actual capital sum assured.
  4. In other words, deduction for life insurance premium with respect to insurance policies issued upto 31st March 2012 shall not exceed 20% of the capital sum assured and life insurance premium paid in respect of insurance policies issued after 31st March 2012 shall not exceed 10% of the capital sum assured.
  5. Finance Act 2012 has inserted an Explanation to Sub-section (3A) to Section 80C to define the term "actual capital sum assured" which would be taken as the base for calculating the ceiling limited of 20% or 10% of the capital sum assured.

Applicable
These amendments will take effect from 1st April 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

2 comments: Post Yours! Read Comment Policy ▼
PLEASE NOTE:
We have Zero Tolerance to Spam. Chessy Comments and Comments with Links will be deleted immediately upon our review.

  1. Under all different exemptions available under 80C what is the maximum amount available for exemption under 80CC and what are these different exemptions

    ReplyDelete