Opinion Of Eminent Legal Luminaries On Controversial Issues

Life insurance premium -Taxability of LIC Policy

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.
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One comment on “Life insurance premium -Taxability of LIC Policy
  1. idumban ravindranathan says:

    Dear Mr. CA. H. N. Motiwalla, Warm Greetings! I AM A RESIDENT INDIAN INDIVIDUAL. I had taken an SBI-UNIT PLUS SUPER POLICY (UIN: 111L069VO1) (A UNIT LINKED NON-PARTICIPATING PLAN). DOC: 07-JUN-2013; ANNUAL PREMIUM RS. 50000. 10 YEARS POLICY TERM. SA: RS.3.5 LAC. HENCE NOT EXEMPT AS PER 10(10D). I PAID ONLY 4 YEARS PREMIUM. LOCK-IN PERIOD: 5 YEARS. SO POLICY GOT TERMINATED. AFTER DEDUCTING 1% TDS OF RS. 2471 FROM THE GROSS PROCEEDS OF RS.247095. SBI LIFE INSURANCE CO. LTD. DEPOSITED ON 31-Dec-2018 RS.244624.38 INTO MY SBI SB ACCOUNT. I TAKE THIS AS “INCOME OTHER THAN SALARY” AS I WAS A SALARIED PERSON. WHILE SUBMITTING MY IT RETURN FOR the ASSESSMENT YEAR 2019-20, SHOULD I ADD THE NETT INCOME OF RS.47095 (GROSS PROCEEDS MINUS 4 YEARS PREMIUMRS) (247095-200000) WITH MY SALARY INCOME TO WORKOUT THE INCOME TAX OR SHOULD I ADD THE GROSS PROCEEDS RS. 247095 WITH MY SALARY INCOME TO WORKOUT IT? REQUEST YOUR GUIDANCE. APART FROM REPLY IN THIS FORUM, KINDLY EMAIL TO MY MAIL ID AS WELL AS WHATSAPP TO MY MOBILE NO. +91 9176125967 THANKS & REGARDS. IDUMBAN RAVINDRANATHAN

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