With awareness of having insurance policies, most of us at least have one policy or at least planning to have to safeguard the family after you. The importance of having policy also increases due to tax benefit on it.
There is a general perception that all premiums paid for Life Insurance are eligible for deduction under 80C subject to overall Limit of 1.50 Lac.
Most of them also assume that maturity amount is exempted under section 10(10D).
Recently, the cabinet approved the Finance Bill 2014 ensuring management control in the hands of Indian enterprise in the insurance sector.
1) With new Finance Bill, it was announced that a Tax Deducted at Source (TDS) will be applicable for insurance plans on maturity.
2) The premium paid for life insurance policy qualifies for a tax benefit up to Rs. 1.5 lakh under section 80C.
3) If premium paid in a financial year is in excess of 10 per cent of the sum assured then tax is deducted on the premium amount up to 10 per cent of the sum assured.
4) As per section 10 (10D) death benefit of an insurance policy is tax exempted.
5) Benefits like maturity benefits is exempted from tax if the premium paid does not exceed 10 per cent of the sum assured.
6) Earlier, premium limit for tax benefits was fixed at 20 per cent of the sum assured. To increase the insurance element, the Finance Minister has changed the limit to 10 per cent.
7) Please note that life insurance premium paid for your parents, Brother, Sisters or your in-laws are not eligible for deduction under section 80C.
8)All premium can be included, cases where you are paying premium for more than one insurance policy.
9) Pension Plans which are approved by IRDA, the commuted Pension received from such Pension fund will be tax-free.
10) Do not forget all premiums and charges are subject to taxes which includes service tax, education cess and more depending on that particular tax period.