Fintotal News Analysis | 15% Limit on Insurance Premium for Disabled or Those Having Certain Ailments for 80C Deduction and 10(10D) Exemption
15% Limit on Insurance Premium for Disabled or Those Having Certain Ailments for 80C Deduction and 10(10D) Exemption
Ruby Jacob, 09 Mar 2013

From April 2013 new insurance policies on persons with disabilities or suffering from certain aliments will be eligible for section 80C deduction if premium paid for them in any year is not more than 15% of the sum assured.

Finance Bill 2013 proposes to amend section 80C and section 10(10D) which currently sets the limit on premium of life insurance policies to 10% of sum assured for income tax deduction and exemption respectively, under those sections.

Under section 80C your taxable income can be reduced by the amount of premium paid for your life insurance policy subject to Rs 1 lakh if premium is not more than 10% of sum assured of the policy. Similarly under section 10(10D) any payouts from life insurance policy is tax free if premium has been over 10% of basic sum assured of the policy.

However many times premium of life insurance policies on persons with disabilities or suffering from certain ailments are above 10% of sum assured due to higher risk of life in such cases. Therefore they have been ineligible for 80C deduction and 10(10D) exemption. The Finance Minister will raise the limit on premium to 15% on such policies bought after 1st April 2013. It is not available on existing policies.

The changes in income tax rebate on life insurance policies will apply to persons having disabilities of Autism, Cerebral palsy, Blindness, Low vision, Leprosy-cured, Hearing impairment, Loco motor disability, Mental retardation, Mental illnesses or Multiple disabilities.

It will also be applicable to those suffering from i) Neurological Diseases with disability of at least 40% (which could be Dementia, Dystonia Musculorum Deformans, Motor Neuron Disease, Ataxia, Chorea, Hemiballismus, Aphasia or Parkinsons Disease), ii) Malignant Cancer, iii) AIDS, iv) Chronic Kidney failure, v) Hematological disorders (which could be Hemophilia or Thalassaemia).

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