Deduction in respect of life insurance premia, contributions to provident fund, etc
B.—Deductions in respect of certain payments
2[Deduction in respect of life insurance premia, contributions to provident fund, etc,
80C. 3[(1) In computing the total income of an assessed, there shall be deducted, in accordance with and subject to the provisions of this section, an amount calculated, with reference to the aggregate of the sums specified in sub-section (2), at the following rates, namely :—
| (a) | where such aggregate does not exceed Rs. 6,000 | the whole of such aggregate ; |
| (b) | where such aggregate exceeds Rs. 6,000 but does not exceed Rs. 12,000 | Rs. 6,000 plus 50 per cent of the amount by which such aggregate exceeds RS. 6,000 ; |
| (c) | where such aggregate exceeds RS. 12,000 | Rs. 9,000 plus 40 per cent of the amount by which such aggregate exceeds RS. 12,000.] |
(2) The sums referred to in sub-section (1) shall be the following, namely :—
(a) where the assessed is an individual, any sums paid in the previous year by the assessed out of his income chargeable to tax—
(i) to effect or to keep in force an insurance on the life of the assess-see or on the life of the wife or husband 4 [or any child] of the assessed ; or
5[(ii) to effect or to keep in force a contract for a deferred annuity on the life of the assessed or on the life of the wife or husband or any child of the assessed :
Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity ;] or
(iii) as a contribution to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies ; 6[or]
7[(iv) 8as a contribution to any provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette ;] 6[or]
6[(v) as a contribution for participation in the Unit-linked Insurance Plan, 19,71 (hereafter in this section referred to as the Unit-linked Insurance Plan) made under section 19(l)(cc) of the Unit Trust of India Act, 1963 (52 of 1963) ;]
9[(b) where the assessed is a Hindu undivided family,—
(i) any sums paid in the previous year by the assessed out of its income chargeable to tax—
(1) to effect or to keep in force an insurance on the life of any member of the family ; or
(2) as a contribution to any provident fund referred to in subclause (iv) of clause (a), where such contribution is to an account standing in the name of any member of the family; or
(ii) any sums deposited in the previous year by the assessed out of its income chargeable to tax in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time, where such sums are deposited in an account standing in the name of any member of the family.]
Explanation : For the purposes of sub-clause (i) of clause (a) and 10[sub-clause (i) of clause (b)] of this sub-section, an insurance on the life of any person referred to therein shall include—
(i) a policy of insurance on the life of such person securing the pay ment of a specified sum on the stipulated date of maturity of the policy, if such person is alive on such date, notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest thereon) in the event of such person dying before the said stipulated date ;
(ii) a policy of insurance effected by a person for the benefit of a minor 11[* * *] with the object of enabling the minor, after he has attained majority, to secure an insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf ;
(c) any sum deducted in the previous year from the salary payable by or on behalf of the Government to any individual being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his wife or children, in so far as the sum so deducted does not exceed one-fifth of the salary ;
(d) if the assessed is an employee participating in a recognised provident fund, his own contributions to his individual account in the fund in the previous year, in so far as the aggregate of such contributions does not exceed one-fifth of his salary in that previous year or 12[ten] thousand rupees, whichever is less.
Explanation: In clause (d) of this sub-section, “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;
(e) if the assessed is an employee participating in an approved superannuation fund, any sum paid in the previous year by him by way of contribution towards the superannuation fund ;
(f) where the assessed is an individual, any sums deposited, in the previous year by the assessed out of his income chargeable to tax, in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time ;
13[(g) where the assessed is an association of persons or a body of individuals consisting 14[, in either case,] only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu—
(i) any sums paid in the previous year by the assessed out of its income chargeable to tax—
(1) to effect or to keep in force an insurance on the life of any member of such association or body or on the life of any child of any of the members of such association or body ;
15[(2) to effect or to keep in force a contract for a deferred annuity on the life of any member of such association or body or any child of any of the members of such association or body :
Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity ; or]
(3) as a contribution to any provident fund referred to in subclause (iv) of clause (a); 16[or]
16[(4) as a contribution for participation by any one member of such association or body in the Unit-linked Insurance Plan ;]
(ii) any sums deposited in the previous year by such association or body out of its income chargeable to tax in a 10-year account or a 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time ;]
17[(h) 18where the assessed is an individual or a Hindu undivided family 19[or, where the assessed is an association of persons or a body of individuals consisting, in either case, only of] husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu, any sums paid in the previous year by the assessed out of his or its income chargeable to tax, as subscription to any such security of the Central Government as that Government may, by notification in the Official Gazette, specify in this behalf.]
(3) The provisions of clauses 20[(a), (b) and (g)]of sub-section (2) shall apply only to so much of any premium or other payment made on a policy other than a contract for a deferred annuity as is not in excess of ten per cent of the actual capital sum assured.
Explanation : In calculating any such capital sum, 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.
(4) The aggregate of the sums referred to in sub-section (2), which qualifies for the purposes of computing the deduction under sub-section (1), shall not exceed—
21[(i) in the case of an individual, being an author, playwright, artist, musician, actor or sportsman (including an athlete), sixty thousand rupees ;
(ii) in the case of any other individual or a Hindu undivided family or any such association of persons or a body of individuals as is referred to in clause (g) of sub-section (2), forty thousand rupees.]
22[(5) If the assessed participating in the Unit-linked Insurance Plan, or in the case of an assessed being an association of persons or a body of individuals referred to in clause (g) of sub-section (2), the member thereof participating in the plan, terminates his participation in the plan (by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation) before contributions in respect of such participation have been paid for five years, then—
(a) no deduction shall be allowed to the assessed under this section in respect of the contribution, if any, paid in the previous year in which the participation is so terminated ; and
(b) the deductions allowed in respect of the contributions paid in the previous years preceding the previous year referred to in clause (a) shall be deemed to be the income of the assessed of that previous year and shall be chargeable to tax accordingly.
Explanation : For the purposes of this sub-section, the deduction allowed under this section in respect of the contribution paid in any previous year shall be the amount by which the deduction allowed under this section for that year exceeds the deduction which would have been allowed for that year if no such contribution had been paid during that year.]
23[(6) If the assessed, being—
(a) an individual, has effected or kept in force an insurance on the life of the assessed or on the life of the wife or husband or any child of the assessed ; or
(b) a Hindu undivided family, has effected or kept in force an insurance on the life of any member of the family ; or
(c) an association of persons or a body of individuals referred to in clause (g) of sub-section (2), has effected or kept in force an insurance on the life of any member of such association or body or on the life of any child of any of the members of such association or body,
terminates the contract of insurance (by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premiums, by not reviving the contract of insurance) before premiums have been paid for two years, then—
(i) no deduction shall be allowed to the assessed under this section in respect of the premiums, if any, paid in the previous year in which the policy is so terminated ; and
(ii) the deduction allowed in respect of the premiums paid in the previous year or years preceding the previous year referred to in clause (i) shall be deemed to be the income of the assessed of such previous year or years and shall be chargeable to tax accordingly.
Explanation 1 : For the purposes of this sub-section, the deduction allowed under this section in respect of the premiums paid in any previous year shall be the amount by which the deduction allowed under this section for that year exceeds the deduction which would have been allowed for that year if no such premiums had been paid during that year.
Explanation 2 : In a case where an assessed terminates his participation in the Unit-linked Insurance Plan in any previous year and also terminates a contract of insurance in that year, the deduction allowed under this section in respect of the contribution or premiums paid in any previous year shall, for the purposes of the Explanation to sub-section (5) and Explanation 1, be the amount by which the deduction allowed under this section for that year exceeds the deduction which would have been allowed for that year if no such contribution or premiums had been paid during that year.]
2. Subject-matter of this section has been dealt with by different sections at different times viz., (i) section 87 as originally enacted : (ii) original section 80A introduced by the Finance Act, 1965, w.e.f. 1-4-1965 ; and (iii) present section 80C was introduced by the Finance (No. 2) Act, [967, w.e.f. 1-4-1968.
3. Substituted for the following by the Finance Act, 1982, w.e.f. 1-4-1983 :
“(1) In computing the total income of an assessed, there shall be deducted, in accordance with and subject to the provisions of this section, an amount calculated, with reference to the aggregate of the sums specified in sub-section (2), at the following rates, namely :—
| (a) | where such aggregate does not exceed Rs. 5,000 | the whole of such aggregate ; | |
| (b) | where such aggregate exceeds Rs. 5,000 but does not exceed Rs. 10,000 | Rs. 5,000 plus 50 per cent of the amount by which such aggregate exceeds RS. 5,000 ; | |
| (c) | where such aggregate exceeds RS. 10,000 | Rs. 7,500 plus 40 per cent of the amount by which such aggregate exceeds RS. 10,000.” |
On earlier occasions, sub-section (1) was substituted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981. the Finance Act, 1979, w.e.f. 1-4-1980, the Finance Act, 1978, w.e.f. 1-4-1979, the Finance Act, 1975, w.e.f. 1-4-1976, the Finance Act, 1973, w.e.f. 1-4-1974 and the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.
4. Inserted by the Finance Act, 1969, w.e.f. 1-4-1970.
5. Substituted by the Finance Act, 1973, w.e.f. 1-4-1974.
6. Inserted by the Finance Act, 1972, w.e.f. 1-4-1973.
7. inserted by the Finance Act, 1968, w.e.f. 1-4-1969.
8. Public provident fund has since been notified vide Notification No. SO 2431, dated 2-7-1968.
9. Substituted for the following clause (b), as amended by the Finance Act, 1969, w.e.f. 1-4-1970, by the Finance Act, 1983. w.e.f. 1-4-1984 :
“(b) where the assessed is a Hindu undivided family, any sums paid in the previous year by the assessed out of its income chargeable to tax, to effect or to keep in force an insurance on the life of any member of the family;”
10. Substituted for “clause (b)” by the Finance Act, 1983, w.e.f. 1-4-1984.
11. “(being the assessed, or a mate member of a Hindu undivided family where such family is the assessee)” omitted by the Finance Act, 1969, w.e.f. 1-4-1970.
12. Substituted for “eight” by the Finance Act, 1976, w.e.f. 1-4-1977.
13. Inserted by the Finance Act, 1970, w.e.f. 1-4-1971.
14. Inserted by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1971.
15. Substituted by the Finance Act, 1973, w.e.f. 1-4-1974.
16. Inserted by the finance Act, 1972, w.e.f. 1-4-1973.
17. Inserted by the Finance Act, 1982, w.e.f. 1-4-1983,
18. National Savings Certificates (VI &. Vll Issues) have been notified under clause (h). Refer Taxmann’s Direct Taxes Circulars, Vol. 1,1985 edn., pp. 484, 485 and 496,
19. Substituted for “or an association of persons or a body of individuals consisting only of” by the Taxation Laws (Amendment) Act, 1984, with retrospective effect from 1-4-1983.
20. Substituted for “(a) and (b)” by the Finance Act, 1970, w.e.f. 1-4-1971,
21. Substituted for the following clauses, which were amended by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981, the Finance Act, 1969, w.e.f. 1-4-1969, the Finance Act, 1978, w.e.f. 1-4-1979, the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972 and the Finance Act, 1970, w.e.f. 1-4-1971, by the Finance Act, 1983, w.e.f. 1-4-1984 :
“(i) in the case of an individual being an author, playwright, artist, musician, actor or sportsman (including an athlete), such percentage of his gross total income, or such amount, as may be prescribed ;
(ii) in the case of any other individual, thirty per cent of his gross total income, or forty thousand rupees, whichever is less ;
(iii) in the case of a Hindu undivided family, thirty per cent of its gross total income, or forty thousand rupees, whichever is less ;
(iv) in the case of an association of persons or a body of individuals referred to in clause (g) of sub-section (2), thirty per cent of the gross total income of such association or body, or forty thousand rupees, whichever is less.”
22. Inserted by the Finance Act, 1972, w.e.f. 1-4-1973. Original sub-section (5) was omitted by the Finance Act, 1968, w.e.f, 1-4-1969.
23. Inserted by the Finance Act, 1982, w.e.f. 1-4-1983.
[AS AMENDED BY THE FINANCE ACT, 1986]