Consequences of non-payment/failure to pay premium

Consequences

Where, in any preceding year, an assessee –

(i) terminate his contract of insurance under the Life Insurance Policy, through notice or where the contract terminates by reason of failure/inability to pay any premium, by not reviving the contract of insurance, before premiums have been paid for two years; or

(ii) terminates his involvement in any unit-linked insurance plan of U.T.I. or L.I.C. The mutual fund, through notice or where he ceases to participate due to failure to pay any contribution, by not reviving his involvement, before contributions in respect of such participation has been paid for five years; or

(iii) Transfers the home property referred to at Sl. No. ‘l’ as aforesaid, prior to the expiry of five years from the closing stages of the financial year in which custody of such property is received by him, or received back, through refund or otherwise, any sum specified therein, then –

No subtraction shall be permitted with respect to any of the sums entitled for deduction and (

The deductions of income-tax allowed with reference to the previous year or years preceding such previous year, shall be deemed to be tax payable by the assessee in the assessment year with respect to such previous year and shall be sum up to the tax on the total income of the assessee with which he is chargeable for such assessment year.

If any shares or debentures or units originating out of an entitled issue of capital to endorse infrastructure is transferred within three years of their attainment, the tax rebate acceptable on this account shall be deemed to be the tax liability of the previous year in when such premature transfer happened.

Sub-section (3) provides that the provisions of Sub-section (2) shall be applicable only to an extent of any premium or other payment made on an insurance policy other than a contract for an overdue/deferred annuity as is not in a surplus of 20% of the actual capital sum secure.

Explanation

While computing any such actual capital sum, no account shall be considered–

(i) of the value of any premiums decided to be returned, or

(ii) Any benefit through bonus or otherwise over and above the amount actually assured, which is to be or may be received under the policy by any person.