Many of us start looking for optimal investment plan only in February or March, just before the Financial Year is getting over. One must judicial plan his investment and spread it out across the various instruments specified in Chapter VI A to avail maximum tax benefit. This post discusses in detail the various sections with the benefits attached to it for your personal tax planning.

Premiums paid for Life insurance eligible for Deduction under Section 80C: Any amount of premium paid to keep in force any life insurance policy created either for yourself, your spouse or your children & in the case of HUF, premium paid on the life of any member thereof, deduction under Section 80C is allowed to the extent of 20% of capital sum assured during any financial year. Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under this section. It is very important to note that even if the policy is in the name of spouse but her total income is not chargeable to tax then the assessee can himself claim deduction for the premium paid in the name of the spouse. Thus a taxpayer can avail the maximum benefit if he has more than one policy as aggregate premium can be included. However the premium amount shall not exceed the ceiling limit of Rs.100000.

Premiums paid for Pension / Annuity plans are entitled for deduction under Section 80CCC:

Section 80CCC investment limit is clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and 80C is Rs.1Lakh. The provisions of this section allows deduction in respect of any premium paid or deposits made towards any annuity plan of Life Insurance Corporation (LIC) of India to the extent of Rs.100000. Further, it is to be mentioned that any amounts received on surrender (whole/part) of annuity plan or amounts received as Pension will be chargeable to tax. It is very important to note that the assessee shall not be entitled to claim a deduction u/s 80C for the premium paid on the above policy if he has claimed deduction u/s 80CCC.  

The maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC and 80CCD will be limited to Rs100000.

Deduction under Section 80D in respect of premiums paid for medical / health insurance:

Every family has regular medical expenses. This may be towards a health insurance premium, or expenditure related to a family member’s disability/critical illness. Provisions have been made to reduce this burden through tax deductions u/s 80D. It is available on the premium paid for medical claim policy by individual for family and HUF for their members, provided the premium amount is paid in any mode other than cash out of his taxable income.

The general deduction available to each taxpayer is Rs.15000, for self, spouse and children. An additional deduction for parents (dependent or independent) is Rs.15000. If the amount paid is for a senior citizen, then one can claim an additional exemption of Rs.5000.

Benefits under insurance policy – Section 10(10D)

As per this section, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax. However the above benefit will not be available if the sum is received under Keyman Insurance Policy or Under Section 80DD (amount deposited with LIC or UTI for medical treatment of handicapped dependent).

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