Dear Peers,
Greetings for the Day..!!
I had one of my client with his LIC premium paid receipts, after going through the same i addressed that there is an amount of Rs. 350 in addittion to the regular premium of Rs. 10000, as penalty for regularising the policy on late payments.
now my question is is a sum of Rs 10300 eligible for deduction unders section 80c?
In this case penalty amount is allowable under section 80C as it is not a penalty for infrigment of law as per explanantion to section 37(1).
As per Section 80C only the premium paid component is eligible for deduction and not the penalty paid thereon.
for the deduction u/s 80c amount paid in respect of insurance premium can only be allowed as deduction
Sub section 3 of section 80C says that the provision of sub section 2 shall apply to so much of any premium or other payment made on an ( insurance policy, other than a contract for defferd annuity, issued on or before the 31st day of march 2012, ) as is not in excess of 20 percent of the actual capital sum assured.
Only premium paid will be eligible for deduction u/s 80C...
Penalty is not an investment... so its not eligible for deduction
Dear Ramesh
The original wordings of the BARE ACT says
"(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"
So my reading between the lines says here no where word insurance premium is not mentioned......as far as i understood it gives deduction of any payment which is for continuing the life insurance of course as far as it is legal and it fits into the criteria of 20% of sum assured..so penalty this should be allowed.
Lets see what others has to say...correct me if am wrong
HI Ramesh,
According to section 80C (2) (i)
Any amount Paid to effect or to keep in force an insurance on the life of persons specified will be allowed.
Hence in your case ful amount that is 10350 is allowed as deduction.
No where in the section they said it is only for the premium amount of the policy.
it is the amount to keep in force a LIC policy.
if any query on this revert
CAclubindia
