Income Tax Savings on premium for life insurance policies – Condition relaxed
Income Tax Savings on premium for life insurance policies of persons with disability or disease – Condition relaxed to provide exemption even if percentage of premium paid is more than 10% of sum assured
Under the existing provisions contained in clause (10D) of section 10, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, is exempt, subject to the condition that the premium paid for such policy does not exceed ten per cent of the ‘actual capital sum assured’.
Similarly as per the existing provisions contained in sub- section (3A) of section 80C, the deduction under the said section is available in respect of any premium or other payment made on an insurance policy of up to ten per cent of the ‘actual capital sum assured’.
The above limit of ten per cent was introduced through the Finance Act, 2012 and applies to policies issued on or after 1 st April, 2012.
Some insurance policies for persons with disability or suffering from specified diseases provide for an annual premium of more than ten per cent of the actual capital sum assured.
Due to the limit of ten per cent, these policies are inel igible for exemption under clause (10D) of section 10. Moreover, the deduction under section 80C is eligible only to an extent of the premium paid up to 10 % of the ‘actual capital sum assured’.
It is proposed to provide that any sum including the sum allocated by way of bonus received under an insurance policy issued on or after 01.04.2013 for the insurance on the life of any person who is (i) a person with disability or a person with severe disability as referred to in section 80U, or (ii) suffering from disease or ailment as specified in the rules made under section 80DDB, shall be exempt under clause (10D) of section 10 if the premium payable for any of the years during the term of the policy does not exceed 15% of the actual capital sum assured.
It is also proposed to amend sub-section (3A) of section 80C so as to provide that the deduction under the said section on account of premium paid in respect of a policy issued on or after 01.04.2013 for insurance on the life of a person referred to above shall be allowed to the extent the premium paid does not exceed 15% of the actual capital sum assured.
This amendment will take effect from 1 st April, 2014 and will, accordingly, apply in relation to the assessment year 2014-15 and subsequent assessment years.
Source : Text of budget 2013-14