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Deduction u/s 80c

Ramesh Jaju (Proprietor) (30 Points)

16 January 2014

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?

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15 Replies

Raunak Jain (Chartered Accountant) (61 Points)
Replied 16 January 2014

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).

Kulwant Singh Khalsa (CA STUDENT) (105 Points)
Replied 16 January 2014

As per Section 80C only the premium paid component is eligible for deduction and not the penalty paid thereon.

ARJUN ASHOK (CA Industrial Trainee) (125 Points)
Replied 16 January 2014

for the deduction u/s 80c amount paid in respect of insurance premium can only be allowed as deduction

SUDATTA GULAVANI (partner) (21 Points)
Replied 16 January 2014

Deduction of Rs.10,000/- only shall be allowed u/s 80C

Raunak Jain (Chartered Accountant) (61 Points)
Replied 16 January 2014

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.

Saurabh Anokhchand Jain (Chartered Accountant) (1043 Points)
Replied 16 January 2014

Only premium paid will be eligible for deduction u/s 80C...
Penalty is not an investment... so its not eligible for deduction

1 Like

Shanmukh G (Assistant) (29 Points)
Replied 16 January 2014

Life insurance premium is only elegible for deduction ....why because penalty paid is not the insurance premium ...and does not constitute investment ....so premium is only the eligible investment u/s 80c....

Shyam C.Pujara (Student (C.A Final)) (177 Points)
Replied 16 January 2014

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

1 Like

KUNAL KOCHAR (CA FINAL) (27 Points)
Replied 16 January 2014

10000 eligible u/s 80 c

rajasekhar (Jr Accountant ) (25 Points)
Replied 16 January 2014

May be 10000 only allowble for deduction

younus (student) (26 Points)
Replied 16 January 2014

Only 10000 is allowed as deduction

Naresh Dharia F.C.A. (PROPRIETOR) (426 Points)
Replied 17 January 2014

As such the additonal fees paid is the late payment of fees so as to revive the LIC policy, hence it is not permissible BUT only Rs 10,000 is deductible u/s 80C.