REBATE CLAIM ON ULIP PREMIUM

you cannot  for claim the rebate for 2009-10. The date of receiving the premium is taken into account for this.

Yes, you can claim credit in the F Y 2009-10 since you have made a draft payment in favour  of the Insurance Co.

Agree with Vishal. By making DD you have discharged your liability and placed the funds at disposal of a third party as agent of LIC.

taking of dd in favour of lic does not entitle him for the rebate in 2009-10.  Unless,it is accounted by lic for premium receipt for 2009-10.  since,in this case lic had received the premium during 2010-11,lic cannot issue a receipt for 2009-10 and as such,he is not entitled to claim rebate for 2009-10.

for claiming rebate actual date of reciept/accounting is taken into account. i.e why sometime,people can claim 2 years premium if both premiums are paid in one financial year.

in short what is actually paid and not  what is payable is taken into account.

Mr Mahendrakumar,

Please go through the Income Tax Act, Please don't give vague and unfounded answers based on your intuition.

Mr Vishal could you please elaborate as to what does the it act and the relevant section says about your contentions.

Mr.Vishal,

I hope you will respond to my  above request.  You must atleast show some decency by answering,since in a public forum like this you had made a statement that my answer is vague and unfounded and based on intuition.

instead of making such accusations,you being an expert on taxation,should have responded quoting the relevant sections of the it act to show that my answers were unfounded and based on intuition.

I strongly register my protest  in the manner,you responded in a public forum like this. Especially, from an expert  who has been contributing a lot,it was an uncalled and indecent response.

Dear Mahendrakumar Ji

I agree with you that the debates on this forum should be decent and one should refreain from such unavoidable comments. But you know ...........................!!!!!!

As far as this matter is concerned, the deduction u/s 80C (earlier rebate u/s 88) is based on payment / deposit made by the assessee and not the acknowledgement of receipient which merely acts as a proof. The accounting by LIC in this matter is not of much concern as even premium paid for two years is considered for deduction in the year of payment though LIC would account such premium in two different years.

The material fact to be seen is whether the payment has gone out of the domain/ control of the payor. Had this payment been by cheque, the case would not have been identical as the funds come under control of payee (LIC) only after clearing of such cheque and its agent bank only once such cheque is presented (subject to clear balance available in the concerned account).

But in this matter the payor has prepared a DD hence, funds have already been placed at disposal with bank with  a direction to pay the same to LIC. The Bank as agent of LIC has received the funds and therefore the liability of payor has been discharged. LIC may issue a receipt later but the fact remains that  a third party non negotiable instrument of payment has been generated on 31st March. Thus the payment is eligible for deduction u/s 80C of the Act in the currentyear itself. There  have been various case laws on such issues related to payment for deductions/ exemptions where such exemptions are constrained with time limitations such as 54EA, 54EB etc.

dear vineet,

please once again read the post.  The party has taken a dd favouring LIC on 31st mar 2010 for a premium on his policy and sent it to the LIC branch concerned.  On receipt of the same LIC issued a receipt on 07th april 2010.

I think you haved mistaken the payment in favour of a collecting bank branch on behalf of lic. In such case the credit would be given as if paid in the lic office on 31st march 2010.

However,merely someone has taken a dd in favour of LIC on 31st march 2010 does not qualify him to such rebate. I am telling this based on my 20 years experience in the field. LIC issues premium deduction certificate only on receipt of the premium either in its office or any authorised agency like collecting bank.(LIC authorises certain bank branches as collecting bank on behalf of LIC)

when somebody merely take a dd in favour of "X" on a date and unless the dd is received in the hand of "X" on the said date,how could we presume that the payment is deemed to be in the hand of "X" on the date?

If you feel,just taking a dd in favour of LIC on 31st march 2010 qualify a person for such rebate in 2009-10 irrespective of the same being received by lic,then LIC has been practicising something against the "law" all these years.

   I hope other "experts in the field" too respond by participating in the discussion.

Mahendra Kumarji, I know what I am writing. As I have already written, irrespective of the fact of date of receipt issued by LIC, what is material in this matter is that the assessee has created a DD in favour of LIC.

I appreciate you experience in the field and do respect the same. Whatever LIC is doing is correct as they are bound to issue receipt only upon receipt of payment in their hand. But there are transactions in which there is time difference between the funds leaving one person and reching the other person. Both are correct from their perspective and the assessee is going to be benefitted from the PAYMENT he has made not the RECEIPT by LIC.

By using those "..." in your last line, i wonder, you are also entering the same zone which you were complaining of two post earlier. Whatever I am writing is also based on whatever little experience I have in handling the administration of Tax Laws.

dear vineet,

may  be you are correct. well,i have replied based on the practice.

"..." by this i was not trying to enter the same zone of which i complainted. Since there was a difference of opinion among us  ,i  was only trying to elicite the opinion of others in this regard.  If you felt otherwise, i regret for the inadvertent  feeling you got  out of my presentation.

  my point is that,even if there is a difference of opinion,and even the author is 100% correct in his version, he could present his view in a polite and matured manner.  Even in a social forum like this,if  we cannot maintain such ettiquete, how can we say,we are experts in any field?

The words mentioned u/s 80C is paid or deposited in the previous year. Its a debatable point when a payment u/s 80C will be deemed to have been deposited or paid, If the assessee deposit the DD with the LIC on 31st march even if its not presented for payment by the LIC. Should it be considered as LIP paid or deposited within time within the meaning of section 80C or not?

In case of cheque the payment is deemed to be have been made on the date when cheque is cleared. In case of DD the matter is debatable one. I think from the point of view of the assessing officer, he will not allow deduction if the receipt issued by the LIC which is dated after 31st march , is produced before him.

Some case law is needed to support the view that DD in favour of LIC in such case will be deemed to have been considered as within time even if the same is acknowledged by the LIC after 31st march.

I will request Mr Vineet as suggested above please state some similar  judgement if is available regarding payment u/s 54EA or 54EB, It will be helpfull in sorting out the question.

in the instant case the assessee has not even deposited the dd with lic on 31st march 2010. he had sent it by regd post on 31st march 2010 and the lic had received the dd  on some date between 01st april 2010 and 07th april 2010

thank you Mr.Amit for raising this valid point.

For renewal of Insurance as well as for Income Tax purposes, the transaction is complete only when the recipient issues a receipt - this is the basis on which deductions for housing loan repayment, Insurance premia (Sec 80C as well 80D) etc. are considered. Thus in this case the actual payment will be considered only in the year 2010-11, not 2009-10. One should not forget that even in cases receipts are issued in March it clearly says "subject to realisation of cheque", but this receipt entiltles one to claim necessary relief. If one has to pay Advance Tax or Self-assessment Tax, merely by making our a DD is not sufficient compliance - the Challan has to be acknowledged by the corresponding bank within specified dates else penalty or interest may become payable.