Insurance premium paid by an individual to ensure the life of family members can be claimed as tax deduction under section 80C of IT act. Family members mean spouse or any child of the individual. Child can be dependent or independent on such individual or married or unmarried or minor or major.
To get eligible for tax deduction under section 80C of IT act, such amount has to be paid to the insurance company before 31st march of the financial year in which investor wants to claim tax deduction.
If your insurance premium amount is due before 31st march of the financial year and you have not paid such premium then you will not be eligible for tax deduction under section 80C.
Such amount will be eligible for tax deduction under section 80C in the year of payment i.e. if you have paid insurance premium related to past financial year in the current year then you will be eligible for tax deduction under section 80C in the current year as this is the year in which you have paid it.
If you are a salaried employee then you need to submit a photo copy of insurance premium paid receipt to your employer as proof of payment.
Self employed persons need to retain the copy insurance premium with them. In case asked, such persons have to produce the paid receipt before the assessing officer as proof of his/her investment.
Deduction under section 80C for insurance premium can not exceed 10% of the sum assured amount. Sum assured amount means the minimum amount assured under the policy excluding the premium amount agreed to be returned and bonus. That means the premium amount paid for such policy or 10% of the sum assured whichever is less will be allowed as tax deduction.
Another restriction to the amount of deduction available under section 80C is Rs. 1, 00,000. Investments in insurance in addition to other investment options available under section 80C, 80CC and 80CCD are restricted to Rs. 1, 50,00 i.e. investment in insurance premium in addition to other investment options available under section 80C, 80CC and 80CCD should not exceed Rs. 1, 50,000.
If a HUF has paid insurance premium to ensure any member’s life then such amount will also be qualified for tax deduction under section 80C of IT act with all the restriction of section 80C as discussed above.