Tax Deduction on LIC Premium u/s 80C of the I T Act.

Life Insurance Plans are very popular as a tool to get deduction u/s 80C of the I T Act. 1. The investment in life insurance can be deducted up to Rs 1,50,000. It a common perception that Premium Paid all Life Insurance Policies qualifies for deduction under section 80C of the Income Tax Act,1961 and full premium amount qualifies for deduction under section 80C .

Apart from several other items provided under section 80C, a taxpayer, being an individual or a Hindu Undivided Family (HUF), can claim deduction under section 80C in respect of premium on life insurance policy paid by him/it during the year.

Policy to be taken in whose name?

In case of an individual, deduction is available in respect of policy taken in the name of taxpayer or his/her spouse or his/her children. In case of a HUF, deduction is available in respect of policy taken in the name of any of the members of the HUF.

No deduction is available in respect of premium paid in respect of policy taken in the name of any person, other than given above.

Deduction Allowed

Overall deduction u/s 80C (along with deduction u/s 80CCC & 80CCD) allowed is up to Rs. 1,50,000

How much deduction available u/s 80C for investment in insurance policies???

Section 80C of the Income Tax Act provides deduction up to Rs 1,50,000 provided you invest according to condition given in section itself. One of the most popular way of saving tax by deduction u/s 80C is purchase of insurance policy. There is common perception that premium upto Rs 1,50,000 on any insurance product like life insurance or Unit Linked Insurance plan is fully allowed.However, this is not correct. The reason for such conclusion is section 80C (3) and 3(A) of the Income Tax Act which specifies which premium is eligible for deduction under section 80C of the Income Tax Act,1961.

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Union Budget - 2018

Budget 2018 : Key Highlights

Individuals and salaried class

• Personal income tax slab rates remains the same.
• Introduction of Standard deduction of Rs 40,000 for the salaried class (replacing the transport allowance and the miscellaneous medical Reimbursement).
• Education cess now to be called as Health and Education cess effective rate increased to 4% from 3%.
• Introduction of tax on long term capital gains above Rs 1 lakh on sale of equity shares @ 10% without giving the benefit of indexation. Capital gains tax for until 31 January 2018 will be grandfathered.

For senior citizens

• No TDS on interest from FD upto Rs 50,000.
• Exemption under Section 80D upto Rs 50,000 for medical insurance for senior citizens.
• Exemption limit for medical expenditure for certain critical illness from raised from Rs 60,000/- in case of senior citizens and from Rs 80,000 in case of very senior citizens, to Rs 1 lakh in respect of all senior citizens, under section 80DDB.

Others

• Reduction in corporate tax rate to 25% for companies having a turnover of Rs 250 crores and less.
• Equity Oriented Mutual funds to face a Dividend Distribution Tax @ 10%.
• Short term capital gains to continue to be taxed @ 15%.
• Cryptocurrencies continued to be considered as not “legal tender”. Government to consider exploring the Blockchain technology.
• Introduction of e-assessments to reduce interface between income tax department and taxpayers. 

Here's how much your income tax liability will be as per the proposed announcements in the budget: 

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