BUSINESS

Ceiling on insurance premia

Sec. 80C(3) places a ceiling of 20 per cent of the sum assured as available for benefit of Sec. 80C. Sec. 80C is easily applicable for endowment policies where there is a specific sum assured. There are other policies where there is no specific sum assured as in the case of Bhima Plus. Since the ceiling with reference to the assured sum is not possible, I presume that the entire premium should be deductible.

Sec. 80C(3) applies for an insurance policy other than a contract for deferred annuity. Insurance policy for purposes of Sec. 80C has to be on the life of a person. Merely because the sum assured may include an element of profit or part of it is returned in instalments or subject to any other variation instead of payment of an assured sum on death or maturity of the policy, it does not mean that the ceiling is inapplicable for policies other than endowment policies. It can be presumed that in all cases of single premium payment, there can be no deduction of more than 20 per cent of such amount in the case of any life policy.

Any other view would not be consistent either with the letter or the spirit of the section.

S. RAJARATNAM

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