Investment to life insurance is eligible for income tax deduction as specified under section 80C of income tax act 1961. To claim such tax deduction, the LIC premium amount must be paid or deposited to ensure life of self or life of spouse or any children of the assessee.
Now the question is who should pay life insurance premium to get tax deduction under section 80C of Income Tax Act 1961. Following interpretation can be made out of section 80C of income tax act 1961;
- Tax payer in all cases can pay life insurance premium to ensure his or her life and can claim deduction under section 80C for such payment.
- If husband is paying life insurance premium for wife then husband will be eligible for income tax deduction. As per section 80C, it does not matter whether wife is dependent on husband or not.
- If life insurance premium has been paid for any child by the father of the child then father will be eligible for income tax deduction.
- If life insurance premium is paid by mother of the child to ensure life of her children then mother will be eligible for income tax deduction.
- Wife will be eligible for income tax deduction if she has paid or deposited life insurance premium for husband.
The person who has paid life insurance premium will be eligible for income tax deduction under section 80C of income tax act 1961.This means, if your father has paid life insurance premium for you then he will be eligible for section 80C deduction not you.
It does not matter whether the person for whom you have paid premium is dependent on you or not but the relationship criteria like spouse, children must be satisfied to get tax deduction under section 80C for LIC payments.
Section 80C does not specify the mode of payment. You can pay it either by cheque or cash.
If it is paid by cheque or NEFT or any other mode of electronic transfer then it will be easy to find out the person who has paid it. But in cases where you are depositing life insurance premium in cash directly at insurance company’s office, it will be difficult to prove who has paid such life insurance premium.
If you can proof that you have paid life insurance premium to ensure life of self or spouse or any child then you are eligible for income tax deduction under section 80C.
Salaried employee need to submit receipt copy of life insurance premium amount paid or deposited to their employer. After submitting, employer will not be asking whether you have paid such premium or someone else has paid it.
If you are a self employed person then you need to retain these copies with you and need not required to submit it to income tax department along with your IT return. But., please make sure that that amount shown as tax deduction under section 80C has actually been paid by you during the financial year.
Income tax department may ask you for such proof at the time of assessment. If they ask you then produce original paid receipts before them.
To get eligible for income tax deduction under section 80C, such amount has to be paid to the life insurance company before 31st march of the financial year for which the assessee want to claim deduction.
If your life insurance premium amount is due before 31st march of the financial year and you have not paid such premium then you will not be eligible for income tax deduction under section 80C. It will be eligible for tax deduction in the year of payment.
This means, if insurance premium related to financial year 2014-2015 has been paid during the financial year 2015-2016, then you are eligible for tax deduction under section 80C in 2015-16 financial year.
To get eligible for income tax deduction under section 80C, the life insurance premium amount must be paid by you i.e. you cannot claim section 80C income tax deduction if such amount has been paid by someone else.
In the case of Hindu undivided family (HUF), HUF will be eligible if life insurance premium amount has been paid or deposited to ensure the life of any member of such family.