Many people in India invest in a Life insurance with a view to save tax as the policy holder can claim up a maximum of Rs. 1, 00,000 as tax deduction from his taxable income under section 80C of Income tax act, 1961. Deduction for life insurance is applicable only when the policy holder has paid or deposited the premium during the previous year for which he is claiming the deduction.
Who are allowed to claim deduction on Life Insurance?
- Individual Assessee including salaried person, self employed person and other individuals and
- Hindu Undivided Family
How much is eligible?
The maximum eligible amount for deduction under section 80C for life insurance premium is Rs. 1, 00,000. This maximum limit of Rs. 1, 00,000 deductions is not specifically available for life insurance. This is available for various other investments mentioned under section 80C and if you are not investing in such other investment options then you can claim Rs. 1, 00,000 as deduction for life insurance premium. For detail on such investment options please refer section 80C of Income tax act, 1961.
From assessment year 2013-2014 onwards if the amount of premium paid by you in a financial year for a life insurance policy is in excess of 10% of the actual capital sum assured then the deduction will be restricted to 10% of the actual capital sum. For assessment year 2012-2103 this limit was 20%. For calculating sum assured you should not include any premium agreed to be returned or any benefit by way of bonus
For whom you can make Life Insurance payment?
As per the provision of section 80C of income tax act, an individual can invest in life insurance policy;
- On his/her own life
- On the Life of spouse
- On the life of Any child (child may be married/unmarried, male/female, minor/major)
In the case of Hindu Undivided Family the life insurance policy can be taken in the name of any member of the family.
Deduction under section 80C of income tax act is available only when you make the payment or deposit the life insurance premium. All the above benefits of getting deduction for life insurance premium paid shall be reversed if the policy terminated or cease to be in force within 2 years after the date of commencement of such insurance policy.