|QUERY:||If a policy holder pays premium more than 10% of the sum assured, can he claim deduction under section 80C of the Act? When amount is received, how it would be taxed?|
|ANSWER:||Section 80C provides that an assessee, being an Individual or HUF shall be allowed a deduction from gross total income of an amount not exceeding Rs. 1,50,000/- in respect of amount paid or deposited in the previous year in the specified savings listed in section 80C(2) of the Act. One of amount for which a policy holder is entitled for deduction is amount deposited to effect or to keep in force an insurance on the life of the policy holder. However, as per section 80C(3A) only premium paid on insurance policy which is not in excess of 10% of the actual capital sum assured, is allowable for deduction.
Similarly, under section 10(10D) of the Act, sum received under a life insurance policy including the sum allocated by way of bonus on such policy is not liable to be included in the total income, whose premium during the term of the policy did not exceed 10% of the capital sum assured.
So, premium paid over 10% of the capital sum assured will not be allowed as deduction under section 80C of the Act and sum received in respect of the policy whose premium during the term of policy exceeded 10% to the capital sum assured would be liable to tax.
|EXPERT:||CA. H. N. Motiwalla|
|SECTION(S):||10(10D), 80C, 80C(2), 80C(3A)|
|CATCH WORDS:||Life insurance premium -Taxability of LIC Policy|
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Life insurance premium -Taxability of LIC Policy
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