- 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.
- 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.
- 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.
- 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.
- 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.
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