Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: cpt :: VAT Audit :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: VAT RATES :: empanelment :: form 3cd :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: TDS :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: articles on VAT and GST in India
 
 
« General »
 Supreme Court agrees to hear plea on imposition of service tax on lawyers
 India's tax department signs 3 advance pricing agreements
 Income Tax Dept to probe deeper into suspicious bank accounts
 Modi may lower taxes to spur demand in his budget sops
 Tax breather for foreign investors: All you need to know
 What the increase in tax collections does not tell us about Indian economy post demonetisation
 India’s crazy retrospective tax on foreign funds will tarnish country’s reputation
 How tax related, PAN grievances can be resolved through E-Nivaran
 Tackling income tax exemptions for equities and agriculture
 Amfi wants tax benefits for retirement plans
 Top five factors which could chart market direction in the coming week

Things to note while taking life insurance premiums for tax saving!
March, 06th 2014

Insurance plans have traditionally been a very popular tax saving tool considered by many people. Almost 70 percent of the overall insurance related products are sold in the quarter from January to March.

While insurance plans do offer tax benefits up to Rs 1 lakh under section 80c of the income tax act, new change in rules and regulations especially with the implementation of Direct Taxes Code (DTC) means one needs to be careful while selecting any insurance product simply because of its tax related benefits. Here are some things to note while taking life insurance premiums for tax saving.

Not All Insurance Payments are Tax Free:

Many people fail to understand that not all insurance payments are tax free. People in their quest to save tax usually end up buying a lot of unwanted insurance products. All insurance agents may not tell about this, as a lot of mis-selling happens in insurance products.

While premiums paid for life insurance policies are exempt from tax up to a maximum of Rs 1 lakh under Section 80C of the Income Tax Act, Section 80C encompasses investments from all the sources including life and health insurance premiums, investments in PPF and pension schemes to a ceiling of Rs 1 lakh per annum. For individuals paying premium more than Rs 1 lakh for multiple policies the apparent tax benefits may not be possible.

Change in Law for Tax Deduction Eligibility:

The change is law with the introduction of the Direct Taxes Code (DTC) has laid down stiff conditions for deduction of premium from taxable income from insurance policies. Under the new regulation, any insurance policy offering a life cover of less than 10 times the annual premium is not eligible for tax deduction. For example if the premium of an insurance policy of ULIP is Rs 30,000, then the policy must offer life cover of at least Rs 3 Lakh to be eligible for tax deduction. In case the above mentioned pre condition for tax benefits is not met, even the income earned from the policy will be taxable.

Low IRR:

Considering the new direct Taxes Code (DTC) allowing insurance policies offering a cover of 10 times the annual premium to be eligible for tax rebate, the internal rate of return or IRR has also reduced substantially. For a cover of Rs 25 lakh, a user would need to spend a minimum of Rs 2.5 lakh a year. Considering the IRR for a 10 year period, the average internal rate of ireturn comes to a sluggish 5.75 percent which is far lower than other investment options like Public provident fund and bank fixed deposits.

Relief Offered for People with Disease or Disability:

While as per the older direct tax code (DTC) all insurance policies issued on or after April 1, 2012 must offer at least ten times the annual premium to be paid for tax free status, exceptions are being introduced for people with disability and those suffering from disease or ailment as specified in the rules made under section 80DDB.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions