Section 88 of Income Tax Act "Rebate on life insurance premia, contribution to provident fund, etc"
88. (1) Subject to the provisions of this section, an
assessee, being an individual, or a Hindu undivided family,
shall be entitled to a deduction, from the amount of
income-tax (as computed before allowing the deductions under
this Chapter) on his total income with which he is
chargeable for any assessment year, of an amount equal to-
(i) in the case of an individual or a Hindu undivided
family, whose gross total income before giving effect to
deductions under Chapter VI-A, is one lakh fifty thousand
rupees or less, twenty per cent of the aggregate of the sums
referred to in sub-section (2):
Provided that an individual shall be entitled to a deduction
of an amount equal to thirty per cent of the aggregate of
the sums referred to in sub-section (2) if his income under
the head "Salaries"-
(a) does not exceed one lakh rupees during the previous year
before allowing the deduction under section 16; and
(b) is not less than ninety per cent of his gross total
income, as defined in sub-section (5) of section 80B;
(ii) in the case of an individual or a Hindu
undivided family, whose gross total income before giving
effect to deductions under Chapter VI-A, is more than one
lakh fifty thousand rupees but does not exceed five lakh
rupees, fifteen per cent of the aggregate of the sums
referred to in sub-section (2);
(iii) in the case of an individual or a Hindu undivided
family, whose gross total income before giving effect to
deductions under Chapter VI-A, exceeds five lakh rupees,
nil.
(2) The sums referred to in sub-section (1) shall be any
sums paid or deposited in the previous year by the assessee
-
(i) to effect or to keep in force an insurance on the life
of persons specified in sub-section (4);
(ii) to effect or to keep in force a contract for a deferred
annuity, not being an annuity plan referred to in clause (xiiia),
on the life of persons specified in sub-section (4) :
Provided that such contract does not contain a provision for
the exercise by the insured of an option to receive a cash
payment in lieu of the payment of the annuity;
(iii) by way of deduction from the salary payable by or on
behalf of the Government to any individual being a sum
deducted in accordance with the conditions of his service,
for the purpose of securing to him a deferred annuity or
making provision for his wife or children, in so far as the
sum so deducted does not exceed one-fifth of the salary;
(iv) as a contribution by an individual to any provident
fund to which the Provident Funds Act, 1925 (19 of 1925),
applies;
(v) as a contribution to any provident fund set up by the
Central Government and notified by it in this behalf in the
Official Gazette, where such contribution is to an account
standing in the name of any person specified in sub-section
(4);
(vi) as a contribution by an employee to a recognised
provident fund;
(vii) as a contribution by an employee to an approved
superannuation fund;
(viii) in a ten-year account or a fifteen-year account under
the Post Office Savings Bank (Cumulative Time Deposits)
Rules, 1959, as amended from time to time, where such sums
are deposited in an account standing in the name of the
persons specified in sub-section (4);
(ix) as subscription to any such security of the Central
Government or any such deposit scheme as that Government
may, by notification in the Official Gazette, specify in
this behalf;
(x) as subscription to the National Savings Certificates (VI
Issue) and National Savings Certificates (VII Issue) issued
under the Government Savings Certificates Act, 1959 (46 of
1959);
(xi) as subscription to any such savings certificate as
defined in clause (c) of section 2 of the Government Savings
Certificates Act, 1959 (46 of 1959), as the Central
Government may, by notification in the Official Gazette,
specify in this behalf;
(xii) as a contribution, in the name of any person specified
in sub-section (4), for participation in the Unit-linked
Insurance Plan, 1971 (hereafter in this section referred to
as the Unit-linked Insurance Plan) deemed to have been made
under sub-clause (a) of clause (8) of section 19 of the Unit
Trust of India Act, 1963 (52 of 1963);
(xiii) as a contribution in the name of any person specified
in sub-section (4) for participation in any such unit-linked
insurance plan of the LIC Mutual Fund notified under clause
(23D) of section 10, as the Central Government may, by
notification in the Official Gazette, specify in this
behalf;
(xiiia) to effect or to keep in force a contract for such
annuity plan of the Life Insurance Corporation or any other
insurer as the Central Government may, by notification in
the Official Gazette, specify;
(xiiib) as subscription, not exceeding ten thousand rupees,
to any units of any Mutual Fund notified under clause (23D)
of section 10 or the Unit Trust of India established under
the Unit Trust of India Act, 1963 (52 of 1963), under any
plan formulated in accordance with such scheme as the
Central Government may, by notification in the Official
Gazette, specify in this behalf;
(xiiic) as a contribution by an individual to any pension
fund set up by any Mutual Fund notified under clause (23D)
of section 10 or by the Unit Trust of India established
under the Unit Trust of India Act, 1963 (52 of 1963), as the
Central Government may, by notification in the Official
Gazette, specify in this behalf;
(xiv) as subscription to any such deposit scheme of, or as a
contribution to any such pension fund set up by, the
National Housing Bank established under section 3 of the
National Housing Bank Act, 1987 (53 of 1987) (hereafter in
this section referred to as the National Housing Bank), as
the Central Government may, by notification in the Official
Gazette, specify in this behalf;
(xiva) as subscription to any such deposit scheme of-
(a) a public sector company which is engaged in providing
long-term finance for construction or purchase of houses in
India for residential purposes; or
(b) any authority constituted in India by or under any law
enacted either for the purpose of dealing with and
satisfying the need for housing accommodation or for the
purpose of planning, development or improvement of cities,
towns and villages, or for both,
not being a scheme the interest on deposits whereunder
qualifies for the purposes of computing the deduction under
section 80L, as the Central Government may, by notification
in the Official Gazette, specify in this behalf;
(xivb) as tuition fees (excluding any payment towards any
development fees or donation or payment of similar nature),
whether at the time of admission or thereafter,-
(a) to any university, college, school or other educational
institution situated within India;
(b) for the purpose of full-time education of any of the
persons specified in sub-section (4);
(xv) for the purposes of purchase or construction of a
residential house property the income from which is
chargeable to tax under the head "Income from house
property" (or which would, if it had not been used for the
assessee's own residence, have been chargeable to tax under
that head), where such payments are made towards or by way
of-
(a) any instalment or part payment of the amount due under
any self-financing or other scheme of any development
authority, housing board or other authority engaged in the
construction and sale of house property on ownership basis;
or
(b) any instalment or part payment of the amount due to any
company or co-operative society of which the assessee is a
shareholder or member towards the cost of the house property
allotted to him; or
(c) repayment of the amount borrowed by the assessee from-
(1) the Central Government or any State Government, or
(2) any bank, including a co-operative bank, or
(3) the Life Insurance Corporation, or
(4) the National Housing Bank, or
(5) any public company formed and registered in India with
the main object of carrying on the business of providing
long-term finance for construction or purchase of houses in
India for residential purposes which is eligible for
deduction under clause (viii) of sub-section (1) of section
36, or
(6) any company in which the public are substantially
interested or any co-operative society, where such company
or co-operative society is engaged in the business of
financing the construction of houses, or
(6A) the assessee's employer where such employer is an
authority or a board or a corporation or any other body
established or constituted under a Central or State Act, or
(7) the assessee's employer where such employer is a public
company or a public sector company or a University
esta-blished by law or a college affiliated to such
University or a local authority or a co-operative society;
(d) stamp duty, registration fee and other expenses for the
purpose of transfer of such house property to the assessee,
but shall not include any payment towards or by way of-
(A) the admission fee, cost of share and initial deposit
which a shareholder of a company or a member of a
co-operative society has to pay for becoming such
shareholder or member; or
(B) [Omitted by the Finance (No. 2) Act, 1991, w.e.f.
1-4-1992;]
(C) the cost of any addition or alteration to, or renovation
or repair of, the house property which is carried out after
the issue of the completion certificate in respect of the
house property by the authority competent to issue such
certificate or after the house property or any part thereof
has either been occupied by the assessee or any other person
on his behalf or been let out; or
(D) any expenditure in respect of which deduction is
allowable under the provisions of section 24;
(xvi) as subscription to equity shares or debentures forming
part of any eligible issue of capital approved by the Board
on an application made by a public company or as
subscription to any eligible issue of capital by any public
financial institution in the prescribed form :
Provided that where a deduction is claimed and allowed under
this clause with reference to the cost of any equity shares
or debentures, the cost of such shares or debentures shall
not be taken into account for the purposes of sections 54EA
and 54EB.
Explanation.-For the purposes of this clause,-
(i) "eligible issue of capital" means an issue made by a
public company formed and registered in India or a public
financial institution and the entire proceeds of the issue
are utilised wholly and exclusively for the purposes of any
business referred to in sub-section (4) of section 80-IA;
(ii) "public company" shall have the meaning assigned to it
in section 3 of the Companies Act, 1956 (1 of 1956);
(iii) "public financial institution" shall have the meaning
assigned to it in section 4A of the Companies Act, 1956 (1
of 1956);
(xvii) as subscription to any units of any mutual fund
referred to in clause (23D) of section 10 and approved by
the Board on an application made by such mutual fund in the
prescribed form :
Provided that where a deduction is claimed and allowed under
this clause with reference to the cost of units, the cost of
such units shall not be taken into account for the purposes
of sections 54EA and 54EB :
Provided further that this clause shall apply if the amount
of subscription to such units is subscribed only in the
eligible issue of capital of any company.
Explanation.-For the purposes of this clause "eligible issue
of capital" means an issue referred to in clause (i) of the
Explanation to clause (xvi) of sub-section (2) of section
88.
(2A) The provisions of sub-section (2) shall apply only to
so much of any premium or other payment made on an insurance
policy other than a contract for a deferred annuity as is
not in excess of twenty per cent of the actual capital sum
assured.
Explanation.-In calculating any such actual capital sum, no
account shall be taken-
(i) of the value of any premiums agreed to be returned, or
(ii) of any benefit by way of bonus or otherwise over and
above the sum actually assured, which is to be, or, may be,
received under the policy by any person.
(3) The sums referred to in sub-section (2) shall be paid or
deposited at any time during the previous year, and the
assessee, being an individual or a Hindu undivided family,
shall be entitled to a deduction under sub-section (1) on so
much of the aggregate of such sums paid or deposited as does
not exceed the total income of the assessee, chargeable to
tax during the relevant previous year.
(4) The persons referred to in sub-section (2) shall be the
following, namely :-
(a) for the purposes of clauses (i), (v), (xii) and (xiii)
of that sub-section,-
(i) in the case of an individual, the individual, the wife
or husband and any child of such individual, and
(ii) in the case of a Hindu undivided family, any member
thereof;
(b) for the purposes of clause (ii) of that sub-section,-
(i) in the case of an individual, the individual, the wife
or husband and any child of such individual, and
(ii) [***]
(c) for the purposes of clause (viii) of that sub-section,-
(i) in the case of an individual, such individual or a minor
of whom he is the guardian;
(ii) in the case of a Hindu undivided family, any member of
the family;
(iii) [***]
(d) for the purpose of clause (xivb) of that sub-section, in
the case of an individual, any two children of such
individual.
(5) Where the aggregate of any sums specified in clause (i)
to clause (xvii) of sub-section (2) exceeds an amount of one
hundred thousand rupees, a deduction under sub-section (1)
shall be allowed with reference to so much of the aggregate
as does not exceed an amount of one hundred thousand rupees:
Provided that where the aggregate of any sums specified in
clause (i) to clause (xv) of sub-section (2) exceeds an
amount of seventy thousand rupees, a deduction under
sub-section (1) in respect of such sums shall be allowed
with reference to so much of the aggregate as does not
exceed an amount of seventy thousand rupees:
Provided further that where the aggregate of any sums
specified in clause (xv) of sub-section (2) exceeds an
amount of twenty thousand rupees, a deduction under
sub-section (1) in respect of such sums shall be allowed
with reference to so much of the aggregate as does not
exceed an amount of twenty thousand rupees:
Provided also that where the aggregate of any sum specified
in clause (xivb) of sub-section (2) exceeds an amount of
twelve thousand rupees in respect of a child, a deduction
under sub-section (1) in respect of such sum shall be
allowed with reference to so much of the aggregate as does
not exceed an amount of twelve thousand rupees in respect of
such child.
(5A) [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003.]
(6) [Omitted by the Finance Act, 2002, w.e.f. 1-4-2003.]
(7) Where, in any previous year, an assessee-
(i) terminates his contract of insurance referred to in
clause (i) of sub-section (2), by notice to that effect or
where the contract ceases to be in force by reason of
failure to pay any premium, by not reviving contract of
insurance,-
(a) in case of any single premium policy, within two years
after the date of commencement of insurance; or
(b) in any other case, before premiums have been paid for
two years; or
(ii) terminates his participation in any unit-linked
insurance plan referred to in clause (xii) or clause (xiii)
of sub-section (2), by notice to that effect or where he
ceases to participate by reason of failure to pay any
contribution, by not reviving his participation, before
contributions in respect of such participation have been
paid for five years; or
(iii) transfers the house property referred to in clause
(xv) of sub-section (2) before the expiry of five years from
the end of the financial year in which possession of such
property is obtained by him, or receives back, whether by
way of refund or otherwise, any sum specified in that
clause,
then,-
(a) no deduction shall be allowed to the assessee under
sub-section (1) with reference to any of the sums, referred
to in clauses (i), (xii), (xiii) and (xv) of sub-section
(2), paid in such previous year; and
(b) the aggregate amount of the deductions of income-tax so
allowed in respect of the previous year or years preceding
such previous year, shall be deemed to be tax payable by the
assessee in the assessment year relevant to such previous
year and shall be added to the tax on the total income of
the assessee with which he is chargeable for such assessment
year.
(7A) If any equity shares or debentures, with reference to
the cost of which a deduction is allowed under sub-section
(1), are sold or otherwise transferred by the assessee to
any person at any time within a period of three years from
the date of their acquisition, the aggregate amount of the
deductions of income-tax so allowed in respect of such
equity shares or debentures in the previous year or years
preceding the previous year in which such sale or transfer
has taken place shall be deemed to be tax payable by the
assessee for the assessment year relevant to such previous
year and shall be added to the amount of income-tax on the
total income of the assessee with which he is chargeable for
such assessment year.
Explanation.-A person shall be treated as having acquired
any shares or debentures on the date on which his name is
entered in relation to those shares or debentures in the
register of members or of debenture-holders, as the case may
be, of the public company.
(8) In this section,-
(i) "contribution" to any fund shall not include any sums in
repayment of loan;
(ii) "insurance" shall include-
(a) a policy of insurance on the life of an individual or
the spouse or the child of such individual or a member of a
Hindu undivided family securing the payment of specified sum
on the stipulated date of maturity, if such person is alive
on such date notwithstanding that the policy of insurance
provides only for the return of premiums paid (with or
without any interest thereon) in the event of such person
dying before the said stipulated date;
(b) a policy of insurance effected by an individual or a
member of a Hindu undivided family for the benefit of a
minor with the object of enabling the minor, after he has
attained majority to secure insurance on his own life by
adopting the policy and on his being alive on a date (after
such adoption) specified in the policy in this behalf;
(iii) "Life Insurance Corporation" means the Life Insurance
Corporation of India established under the Life Insurance
Corporation Act, 1956 (31 of 1956);
(iv) "public company" shall have the same meaning as in
section 3 of the Companies Act, 1956 (1 of 1956);
(v) "security" means a Government security as defined in
clause (2) of section 2 of the Public Debt Act, 1944 (18 of
1944);
(vi) "transfer" shall be deemed to include also the
transactions referred to in clause (f) of section 269UA.
(9) No deduction from the amount of income-tax shall be
allowed under this section to an assessee, being an
individual or a Hindu undivided family for the assessment
year beginning on the 1st day of April, 2006 and subsequent
years.