Latest amendments to Life insurance policies eligible for deduction Under Section 80C
Through life Insurance Policies individuals and HUF can save major tax .Lots of major changes have done in Section 194DA on payment of premiums which can be easily understand through below article.Amendments to section 80C – Tax Effect on Life Insurance Policies:-While claiming deduction U/s. 80C for Premium paid life insurance policies, exemption amount is restricted to the as below on percentage of Capital Sum Assured:
We can understand lic in two way First is those policies which are regular in nature and second which are specified in section 80U and 80DDB of Income tax Act,1961
Issued from 01.04.2012 – premium paid not in excess of 10% of Capital Sum Assured (as amended by Finance Act 2012.
Issued between 01.04.2003 to 31.03.2012 – premium paid should not be in excess of 20% of Sum Assured
for other Life Insurance Policies issued in lieu of Sec. 80U (person with disability as specified) & Sec. 80DDB (suffering from diseases and ailments) issued after 1st of April 2013 – premium paid not in excess of 15% of Capital Sum Assured as amended by Finance Act 2013.
Actual sum assured is defined as (Explanation given under 80C (3A))
1.The value of premium agreed to be returned; or
So The deduction U/s 80C can not be claim more than 10% or 15% as the case may be of the sum assured.
If the assessee terminates his contract with insurance company by reason of failure to pay any premium or any other reason.
Single premium policy below two years after the date of Commencement of insurance or
In any other case, before premiums have been paid for two years
In case of ULIPS 80C(2)(x) or (xi) within five years
The total amount of deduction claimed this way will be treat as income in such previous year and shall be liable to tax.
3 TDS on Payment received on Life Insurance policy U/s 194DA [Inserted by the Finance (No. 2) Act, 2014, w.e.f. 1-10-2014.] Section reproduced below
Provided that no deduction under this section shall be made where the amount of such type of payment is less than one hundred thousand rupees.”
Summarizing the section
Rate of TDS : 2%
If PAN not Available – TDS rate will be 20%
TDS will be deductable where total payment amount during the financial year exceeds 100000/-
Annuities received ie., pension plan are not covered u/s10(10D) therefore liable for TDS subject to limit specified ie., 100000/-
Terminated Life Insurance contracts subject to limit specified ie., 100000/-
Aggregate payment does not exceed Rupees one lakh during one financial Year
Policies issued satisfying section 10(10D) and amount received on death of the person other than Keyman insurance policy and U/s 80DD(3),80DDA(3)
Sum receive U/s 80DD(3),80DDA(3)
Sum receive under a Keyman insurance policy