Yes Bank crisis could hit your tax saving for current financial year: Here's what to do

Tax payers, irrespective of whether their accounts are with Yes Bank or not, need to make sure that their tax saving for the current financial year is not impacted by the Yes Bank crisis. If your SIP in an ELSS mutual fund scheme or premium for health or life insurance was being auto-debited from a Yes Bank account then these debits won't have taken place after the bank was put under moratorium. What is worse is that many individuals who don't have accounts with Yes Bank may also be impacted.

It appears that Yes bank is the nodal bank for NACH debits by the country's largest insurer, Life Insurance Corporation of India (LIC). Many LIC policy holders have received an sms from the insurer to the effect that NACH premium debit for their policies will be delayed as NACH nodal Bank-Yes Bank - is on moratorium.

This is the message that the LIC sent to policyholders whose insurance premiums are due to be debited from their bank accounts (even non Yes Bank accounts) during the moratorium period: "NACH premium debit for your policy XXXX will be delayed as NACH nodal bank - Yes Bank is on moratorium. Kindly bear with us. Alternate arrangements are on."


While the sms says that "alternate arrangements are on'', be aware that if the premium for your life or health insurance policies or your SIP instalment does not get debited/paid via alternate arrangements in the current financial year, i.e., by March 31, then you will not be able to claim tax break for it. Consequently, the tax saving that you had planned would get reduced to the extent of shortfall in premium payment / investment in ELSS scheme.

So it is important for both Yes Bank and non-Yes Bank accountholders to ensure that their tax-saving investments or insurance policy premium payments are completed via debits from their accounts or alternate payment methods by March 31, 2020, i.e., the last date to complete your tax-saving investments. Many investors invest in ELSS mutual funds via a systematic investment plan (SIP) for which they give their consent for auto-debit of SIP instalments from their bank account on pre-fixed dates.

Abhishek Soni, CEO & founder, Tax2win.in, an ITR filing website says, "There are various provisions under the income tax law whereby you can claim the deductions and save the tax. For example, if you are investing in ELSS mutual funds or paying life insurance premiums etc. then you are eligible for the deduction under Section 80C. However, if you want to claim the deduction, payments must be made or debited to your account on or before 31st March 2020. If the payment is made after 31st March 2020, then no deduction can be claimed for the ITR of F.Y. 2019-20."

• Make alternate arrangements

If your insurance premium or ELSS SIP is not debited due to Yes Bank being the nodal bank or if you are a Yes Bank account holder, then it is better you make alternative arrangements for payment, so that your tax-saving investments are not affected. Though once the moratorium is lifted, the electronic payments will resume.

• Grace period for payment

In case you are not able to make alternate arrangements, you should know that insurance policies normally come with grace periods for premium payment.

For instance, LIC usually (especially for non-auto debit payments) allows payment of premium within a grace period of 30 days from the date when the premium is due. So, if your premium is to be debited on March 14, your grace period would be till 13 April.

However, this is not available in the case of health insurance premium. Remember, insurance cover is not available in the grace period and the insurer can ask you to undergo a medical check-up before issuing the policy.

However, in case of an ELSS SIP there is no grace period. Here, if no debit is made on the date it is due, then no investment will be made in that month. For instance, if your SIP is due on March 14 and payment is not debited from your bank account, then the SIP will not be registered for that month. To make a payment, you will have to make an additional payment via cheque or another acceptable electronic method.

• Investment proofs

It is important to ensure that you have proof of the investment made by you via an alternative route. If the LIC premium is being paid by you either via cash or using any other digital method such as Net banking, then ensure that you have the collected the cheque premium receipt.

• Health insurance premium not in cash

In case of a health insurance policy, remember that the premium must be paid via electronic channels only. Premium paid in cash will not be eligible for deduction under section 80D. It would be wise to get the policy issued before March 31, 2020. This is because if the health insurer rejects your insurance proposal due to some reason after March 31, 2020, then you will not be eligible for claim under section 80D.

• Mutual fund SIP

If the SIP amount for ELSS scheme is not debited from your account, then ensure that you have made the investment via cheque/digital methods using an alternative bank account. Further, ensure that such amount is debited from your account and the investment is reflecting in the statement of account given by the fund house.

• After Yes Bank moratorium is lifted

Individuals should remember that once the moratorium on Yes Bank is lifted and the bank starts normal banking transactions, one will have to check whether the scheduled debits from their savings account, which did not happen during the moratorium period, will happen later automatically or not.

Is there any action that one needs to take regarding the same. If you have already paid your premium using another bank account then you should ensure that it does not get debited again for the same month.