What is the Maximum Exemption allowable under 80C for Life Insurance Premium Paid?
Section 80C of the Income-tax Act, in section (3), sub-section (3A) –(3) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity,issued on or before 31st day of March, 2012 as is not in excess of twenty per cent of the actual capital sum assured.
Explanation.—In calculating any such actual capital sum assured, no account shall be taken—
(i) of the value of any premiums agreed to be returned, or
(ii) of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.(3A) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity, issued on or after the 1st day of April, 2012 as is not in excess of ten per cent of the actual capital sum assured.Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is-
(a) a person with disability or a person with severe disability as referred to in Section 80U, or
(b) suffering from disease or ailment as specified in the rules made under Section-80DDB,
the provisions of this sub-section shall have effect as if for the words “ten per cent.”, the words “fifteen per cent.” had been substituted.Explanation.—For the purposes of this sub-section, “actual capital sum assured” in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—
(i) the value of any premium agreed to be returned; or
(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.
1- No impact on the Insurance Policies Issued on or before 01.04.2003
2- Insurance Policies Issued from 01.04.2003 and on or before 31.03.2012 – premium paid not in excess of 20% of Capital Sum Assured.
Example 1: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 40,000 in FY – 2014-15 than you are eligible for 20% of capital Sum Assured Rs. 10,00,000 = Rs. 2,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-1 case you are eligible for Rs. 40,000.
Example 2: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 20014-15 than you are eligible for 20% of capital Sum Assured Rs. 10,00,000 = Rs. 2,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-2 case you are only eligible for Rs. 1,50,000, even you had paid premium Rs. 2,00,000.
Example 1: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 40,000 in FY – 2014-15 than you are eligible for 20% of capital Sum Assured Rs. 10,00,000 = Rs. 2,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-1 case you are eligible for Rs. 40,000.
Example 2: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 20014-15 than you are eligible for 20% of capital Sum Assured Rs. 10,00,000 = Rs. 2,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-2 case you are only eligible for Rs. 1,50,000, even you had paid premium Rs. 2,00,000.
3- Insurance Policies Issued from 01.04.2012 – premium paid not in excess of 10% of Capital Sum Assured (as amended by Finance Act 2012).
Example 3: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 40,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-3 case you are eligible for Rs. 40,000.
Example 4: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-4 case you are only eligible for Rs. 1,00,000, even you had paid premium Rs. 2,00,000.
Example 3: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 40,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-3 case you are eligible for Rs. 40,000.
Example 4: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-4 case you are only eligible for Rs. 1,00,000, even you had paid premium Rs. 2,00,000.
4- Insurance Policies Issued from 01.04.2013 – premium paid not in excess of 10% and 15% (for the person with disability or suffering from specified disease) of Capital Sum Assured (Inserted by the Finance Act, 2013, w.e.f. 1-4-2014).
Example 5: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 40,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-5 case you are eligible for Rs. 40,000.
Example 6: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-6 case you are only eligible for Rs. 1,00,000, even you had paid premium Rs. 2,00,000.
Example 7: If you have bought an insurance policy or ULIP for the person with disability (as per Section-80U) or suffering from specified disease (as per Section-80DDB) – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 2014-15 than you are eligible for 15% of capital Sum Assured Rs. 10,00,000 = Rs. 1,50,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-7 case you are only eligible for Rs. 1,50,000, even you had paid premium Rs. 2,00,000.
Example 5: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 40,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-5 case you are eligible for Rs. 40,000.
Example 6: If you have bought an insurance policy or ULIP – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 2014-15 than you are eligible for 10% of capital Sum Assured Rs. 10,00,000 = Rs. 1,00,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-6 case you are only eligible for Rs. 1,00,000, even you had paid premium Rs. 2,00,000.
Example 7: If you have bought an insurance policy or ULIP for the person with disability (as per Section-80U) or suffering from specified disease (as per Section-80DDB) – sum insured Rs.10,00,000 and paid premium Rs. 2,00,000 in FY – 2014-15 than you are eligible for 15% of capital Sum Assured Rs. 10,00,000 = Rs. 1,50,000 or Rs. 1,50,000 (80C Limit), which ever is less. So in this example-7 case you are only eligible for Rs. 1,50,000, even you had paid premium Rs. 2,00,000.
Therefore, as per Section 80C of the Income-tax Act, sub-section (3) and sub-section (3A), it is clear that whatever insurance premium is paid for any insurance policy (other than deferred annuity) or ULIP , the maximum allowable is fixed at 10% of the sum assured. The 15% limit is only applicable for the person with disability (as per Section-80U) or suffering from specified disease (as per Section-80DDB).
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