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) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
General »
 Composition Dealers need not furnish data in serial number 4A of Table 4 of FORM GSTR-4
 I-T Dept may probe tax evasion through F&O trades
 IL&FS crisis: ICAI seeks explanation from audit firms
 Arun Jaitley pushes for more tax filing in FY19
 Are you filing Income Tax Return (ITR)? This is where you are trapped! Know what is Form 16 , Form 16A, Form 26AS, TDS statement
 Officials handling GST can assess all No centre-state wall
 How is long-term capital gain from Nabard bonds taxed?
 Himachal Pradesh government notifies TDS and TCS provisions
 Tax law panel may look to drop dividend distribution tax (DDT)
 Lifestyle to refund profiteered amount
 How to club tax benefits and retirement planning to ensure peace of mind

How to get income tax benefits from your life insurance cover
July, 25th 2018

Thanks to Section 80C of the Income Tax Act, you don’t have to pay tax on ?1.5 lakh of your salary—you can deduct this amount from your taxable income. But this deduction is allowed only for certain expenses and investments.

Premiums that you pay for a life insurance policy is one such expense, but did you know that the life insurance cover needs to be at least 10 times the annual premium that you pay to be eligible for tax benefits?

Income tax rules

Under Section 80C, premiums that you pay towards a life insurance policy qualifies for a deduction up to ?1.5 lakh, while Section 10(10D) makes income on maturity tax-free if the premium is not more than 10% of the sum assured or the sum assured is at least 10 times the premium.

But if the sum assured is less than 10 times the premium—for instance you pay ?1 lakh as premium for a sum assured of ?5 lakh—you will get a deduction on the premium up to 10% of the sum assured. In the example, your deduction will be ?50,000 and not ?1 lakh (?50,000 is 10% of ?5 lakh).

Also, in case of death, the sum assured that’s paid to the nominee continues to be tax-free. But, on maturity, since the policy doesn’t meet the qualifying criterion for tax benefit, the income will be taxed at the marginal tax rate.

In fact, in order to ensure compliance, if the maturity proceeds exceed ?1 lakh, then a tax deduction at source (TDS) will apply and the insurer will deduct 1% as TDS if the PAN of the policyholder is available.

Why does it matter?

If you are buying a term plan, then maybe you don’t have to delve into the nitty-gritty because the sum assured in a term plan is several times the premium that you pay.

However, for insurance-cum-investment plans like unit-linked insurance plans or endowment and money-back insurance plans and single premium policies, looking at the insurance limit becomes important.

This is because, for policyholders below 45 years of age, insurance plans now offer a minimum sum assured of 10 times the annual premium, but those above 45 years may get a sum assured that is seven times the annual premium. Even in case of single-premium plans, the sum assured may be less than 10 times the premium.

But such policies will not qualify for tax benefits, so make sure you go through your insurance policy carefully.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Internet Marketing Website Marketing Internet Promotion Internet Marketing India Website Marketing India Internet Promotion India Internet Marketing Consultancy Website Marketing Consulta

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