Tax on Income
Are you looking out for ways to save tax this financial year? Learn how life insurance can help you to save tax while protecting your family's financial future.n
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Presentation Transcript
How life insurance protects and saves tax? Both your protection and tax savings are provided by life insurance. This article investigates the consequences of tax savings. Let's first examine how your taxable income is determined in relation to the tax-saving investments you make in order to comprehend how you might save tax on income from life insurance. Let's say Rs 5,00,000 is the taxable share of your income. According to your income category, this means that your tax obligation for the year would be calculated at Rs 5,00,000. So, for example, if a particular investment option is reported to provide a tax benefit of up to Rs 50,000 annually, this Rs 50,000 is subtracted from your taxable income, which is Rs 5,00,000. Your tax obligation would therefore be based on Rs. 4,50,000.
Few Pointers on tax benefits on life insurance If the insurance was obtained after April 1, 2012, and the premium paid does not exceed 10% of the total assured under the policy, you may be eligible for a deduction under Section 80C. The premium cannot exceed 20% of the sum guaranteed if the insurance was purchased before April 1, 2012. If the premium paid does not exceed 15% of the sum assured and you have obtained a life insurance policy for a disabled family member or yourself, you may be entitled to claim a deduction under Section 80C to reduce your tax on the premium. However, the handicap must be registered under Section 80U of the Income Tax (IT) Act, and the terminal illness must be listed under Section 80DDB. If the premium does not exceed 10% of the sum assured, the maturity amount paid under the policy is not subject to Section 10D taxation, which is another benefit of life insurance. If the premium is more than 10% of the amount assured, the exemption is not applicable. On plans, however, whose maturity amount exceeds Rs 1,00,000, TDS is deducted; nevertheless, this TDS can be reclaimed by filing an ITR for the following year.
