Section 80c deduction on insurance premium and ulip

Dear Sir,

On FY 2016-17 an assessee paid insurance premium (premium amount less than 10% of sum assured) and claimed 80C deduction. But in 17-18 he didn''t continue the insurance and it got lapsed. So whether he needs to reverse the 80C claimed during 2016-17. If there is a provision to reverse, whether this provision is strictly adhered by Income tax on scutiny? I have never seen anyone reversing this amount. When i read the section 80C there it is mentioned a minimum period of 5 years ofr ULIP and 2 years for life insurance.

I contacted some insurance agents to know whether there are such conditiona. But everyone said once 80C is claimed there is no need for reversal.

Your reply is much awaited. Thank You.

Dear Pramod,

As per my knowledge Yes there is need to reverse the amount taken as deduction on Single insurance policy if it terminates before expiry of 2 years (5 in case of ULIPs). So lawfully you should treat the amount earlier claimed as deduction as income of the previous year in which it is being terminated.

But as per in general practice, there is No need to reverse that if the return of that year in which deduction was claimed earlier has been Processed and there is no such scrutiny about that amount. Because if you do that you'll first make your client disturbed that what's wrong going on with his return and secondly you are wilfully claiming to Govt that you have defaulted.

So in my opinion you should not do anything about that becuase in practical life Deptt rarely check that and it gives a lot of advantage to Individual taxpayers but you must make sure that in future you communicate with your client properly before filing the return and Please Don't in Any Manner Stimulate The Tax Evasion.

Thanks.