Section 80c provisions must be borne in mind while going for Tax Deductible Insurance policies. The proposed DTC has laid down an important provision that says the insurance policy will not be eligible for income tax deduction if the life cover proposed by the policy is less than 20 times the annual premium. What that means is, it should be ensued while purchasing the policy that the life cover assured by the policy must be at least 20 times that of the annual premium.
For example, if the insurance policy or ULIP has a premium of Rs 10,000/- then it must offer a life cover of at least Rs 2,00,000/-. Only then such a policy will be eligible for deduction under section 80c.
If the above condition is not met, the policy will not be eligible for tax deduction. The premium will not be eligible for deduction and the income accrued on the policy will also not be eligible for deduction.