As per the new changes in the income tax "It is provided in section 10 (10D) that any sum received under a life insurance policy including bonus will not be exempt from total income if the premium payable in any of the years during the term of the policy exceeds twenty percent of actual capital sum assured. It is now proposed that from the assessment year 2013-14, exemption under section 10 (10D) will be available only those life insurance policies in which premium payable will not exceeds ten percent of capital sum assured in any of the year during the term of the policy.
Similar amendments are proposed in sub section (3) of section 80C that only those life insurance premium are eligible for deduction under section 80C which does not exceeds ten percent of capital sum assured."
For example.... (1) I have one LIC policy of which sum assured is 5 Lakhs and we have paid premium more than 20 % of sum assured whcih is 1.10 Lkahs. Can i take the exemption of full premium which I have paid during the year 1.10 Lakhs.
OR If I have paid total premium 1 Lakhs during the FY 2012-13 for multiple policies so do we need to take only the 10% of sum assured in exemption not the total amount of Rs 1 Lakh.
Kindly request you to let me know about this amendment.
21 July 2024
The amendments mentioned in your query pertain to sections 10(10D) and 80C of the Income Tax Act, 1961, regarding the eligibility of life insurance premiums for exemption and deduction. Let me clarify how these amendments affect the tax treatment of life insurance premiums:
### Amendments Overview:
1. **Section 10(10D)**: - Earlier, any sum received under a life insurance policy including bonus was exempt from tax if the premium payable did not exceed 20% of the actual capital sum assured. - From Assessment Year 2013-14 onwards, this exemption is restricted to policies where the premium payable does not exceed 10% of the capital sum assured in any year during the term of the policy.
2. **Section 80C**: - Life insurance premiums paid are eligible for deduction under Section 80C of the Income Tax Act. - The amendment proposes that premiums paid for life insurance policies will be eligible for deduction under Section 80C only if they do not exceed 10% of the capital sum assured.
### Application to Your Example:
Let's address your scenarios based on the amendments:
According to the amendment: - The premium should not exceed 10% of the sum assured for the policy to qualify for tax exemption under Section 10(10D) and deduction under Section 80C.
In your case: - Since the premium paid (₹1,10,000) exceeds 10% of the sum assured (₹5,00,000), the entire premium of ₹1,10,000 will not qualify for exemption under Section 10(10D). - For Section 80C deduction, you can only claim the amount up to 10% of the sum assured, which would be ₹50,000 (10% of ₹5,00,000).
**Scenario 2: Multiple LIC Policies**
- **Total Premium Paid for Multiple Policies:** ₹1,00,000
For multiple policies: - Each policy needs to be individually evaluated to see if the premium paid exceeds 10% of its respective sum assured. - Only the premiums that do not exceed 10% of the sum assured for each policy would be eligible for deduction under Section 80C.
### Conclusion:
- The amendments restrict the tax benefits associated with life insurance premiums to policies where the premium payable does not exceed 10% of the sum assured. - If the premium exceeds this threshold, the excess amount does not qualify for exemption under Section 10(10D) or deduction under Section 80C. - It's important to review each policy individually to determine eligibility based on the 10% rule for both exemption and deduction purposes.
For accurate tax planning and compliance, especially concerning insurance premiums, it's advisable to consult with a tax advisor or chartered accountant who can provide guidance specific to your financial situation and the details of your insurance policies.
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