Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

Deduction 80c

Ajay Singh (Senior Accountant) (97 Points)

05 September 2011

Dear Sirs,

Someone takes life insurance policy on the name of his grandson (i.e. life insured of his grandson). He(Grandfather) is policy owner and all money back will receive on his own name. Kindly sugeest benefit of Section 80C can be taken or not?. I am attaching insurance document for your reference.

Kindly help me on above topic.

Thanks

Ajay Singh

Reply
Follow
Share

7 Replies

CA Priyanka Kushwaha (Chartered Accountant) (1072 Points)
Replied 05 September 2011

Hello Ajay,

Please refer to Section 80C (2) (i), it states as under;

80C. (1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh rupees.

(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee—

(i) to effect or to keep in force an insurance on the life of persons specified in sub-section (4);

And Sub Section 4(a) of Section 80C says as follows:

(4) The persons referred to in sub-section (2) shall be the following, namely:—

(a) for the purposes of clauses (i), (v), (x) and (xi) of that sub-section,—

(i) in the case of an individual, the individual, the wife or husband and any child of such individual, and

(ii) in the case of a Hindu undivided family, any member thereof;

Therefore if you are asking for an individual, then the deduction would not be allow in pursunace of Section 80C mentioned as above, however if you are referring an HUF, then the deduction would be allow if, the grandson is a member of HUF.

I hope this reply would be needful for you.

Kind Regards,

Priyanka Kushwaha

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 05 September 2011

Originally posted by : Ajay
	Dear Sirs, Someone takes life insurance policy on the name of his grandson (i.e. life insured of his grandson). He(Grandfather) is policy owner and all money back will receive on his own name. Kindly sugeest benefit of Section 80C can be taken or not?. I am attaching insurance document for your reference. Kindly help me on above topic. Thanks Ajay Singh

as per your language , it appears that the grandfather has taken policy on his own life and risks are covered of grandfather only, only the nomination is done in favor of "grandson"

LIC policies are meant for "life risk cover" and if the benefits of maturity or money back goes to grandfather direct, then grandson is not covered under "life risk".

under this situation the premium is paid for self life, and hence available for 80C deduction.

CA Priyanka Kushwaha (Chartered Accountant) (1072 Points)
Replied 05 September 2011

Originally posted by : U S Sharma
	as per your language , it appears that the grandfather has taken policy on his own life and risks are covered of grandfather only, only the nomination is done in favor of "grandson" LIC policies are meant for "life risk cover" and if the benefits of maturity or money back goes to grandfather direct, then grandson is not covered under "life risk". under this situation the premium is paid for self life, and hence available for 80C deduction.

Your view is correct if, Ajay is referring this, but I seems that he wants to say thta policy is on the name of his grandson, and not in the name of grandfather, and no nomination is here, therefore in Income tax computation of the grandfather, the deduction u/s 80C would not be allowed to him if premium goes on LIC of his grandson. Ajay, please clear your position, afterthat, we would be able to provide any correct suggestion to you.

Ajay Singh (Senior Accountant) (97 Points)
Replied 05 September 2011

Dear Sir,

Thanks for your views. Life insured is of grandson and premium payer is grandfather. LIC does not allow insurance of persons over 65 years of age. Grandfather is paying premium and all moneybacks will be on the name of grandfather but life insured is of grand son. I am attaching file for your reference.

Kindly suggest.

Thanks

Ajay Singh

Attached File : 444896 822464 birla.pdf downloaded: 714 times

CA Priyanka Kushwaha (Chartered Accountant) (1072 Points)
Replied 05 September 2011

Hi Ajay,

Since, the insured person is grandson, and as per my understanding Income tax allows dedcution on LIC premium paid on the life insurance of self, spouse and children in case of an individual, hence it would mean that the insured person should be individual self, spouse or his children to avail deduction u/s 80C of the Act, in your case Grandfather is owner of the policy, because insured person is a minor, but this would not give a meaning that the person who pays LIC premium will avail deduction in his or her Income Tax computation.

In your case the deduction will not be available to the grandfather,because the LIC is not in the name of himself or his spouse or his children.

Hope, you got the clarity.

Regards,

Priyanka

1 Like