Answer

1. F

   Facts

   Life insurance premium is part of the ₹1.5L Section 123, Income-tax Act 2025 (old Sec 80C) pool, but with conditions. Paying premium for a spouse or children's policy: allowed. Premium above 10% of sum assured: Sec 123 (old Sec 80C) denied, Sec 11 with Schedule II (old Sec 10(10D)) maturity exemption denied. Many miss these conditions and over-claim.

2. P

   Provisions and law

   • Sec 123 (old 80C(2)(a))
   • Sec 123 (old 80CCE)
   • Sec 123 (old 80C
   • Sec 11 (old 10(10D)) link
3. A

   Analysis

   The 10% rule, most important condition: Policy sum assured: ₹5L. Annual premium: ₹60,000. Test: ₹60,000 ÷ ₹5,00,000 = 12%. Premium is 12% of sum assured, above 10%. Sec 123 (old Sec 80C): only ₹50,000 allowed (10% of ₹5L). ₹10,000 excess premium gets no Sec 123 (old Sec 80C). And at maturity: Sec 11 with Schedule II (old Sec 10(10D)) exemption is ALSO lost, maturity proceeds taxable. The policy is a tax trap in both directions. Which policies have this problem: Old endowment and money-back plans (LIC Jeevan Anand pre-2000 era) often had very low sum assured relative to premium. Some ULIP policies with high premium and low mortality cover. Pure term insurance: sum assured is ₹50L on ₹8,000 premium = 1.6% ratio, no issue. Term plans always pass the 10% test easily. Premium for spouse and children, allowed: Husband can claim Sec 123 (old Sec 80C) for wife's LIC policy premium (if wife is dependent or even if working). Wife can claim for husband's policy.

4. C

   Conclusion

   1. 1Check sum assured for each life policy: calculate premium ÷ sum assured ratio
   2. 2If ratio > 10% (post-2012 policy): Sec 123 (old Sec 80C) is capped at 10% of sum assured only
   3. 3Collect premium receipts for all policies: own, spouse, children
   4. 4Check: paying for parents' policy? Sec 123 (old Sec 80C) not available for parents' life insurance
   5. 5Compute total Sec 123 (old Sec 80C): EPF + PPF + ELSS + life premium + others, must stay within ₹1.5L
   6. 6Submit Form 124 (old Form 12BB) to employer: include all insurance premium receipts by February 28

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