Life Insurance coverage Premium is a premium which is paid by an individual for insuring the lifetime of the particular person insured. In case any mis-happening occurs to the lifetime of the particular person insured, the life insurance coverage firm provides an quantity for which the life was insured.
To encourage individuals to go for a Life Insurance coverage Coverage, the Govt permits tax deduction on cost of Life Insurance coverage Premium. Furthermore, it additionally provides a number of tax advantages for the maturity quantity which is obtained again from the Life Insurance coverage Firm.
Tax Deduction on Fee of Life Insurance coverage Premium – Part 80C
Deduction beneath Part 80C is allowed to the one who is making the cost for insuring the lifetime of particular person insured. Though an individual pays life insurance coverage premium on behalf of another particular person as nicely, he can be allowed a tax deduction for cost of life insurance coverage premium solely in case the premium paid is for insuring the lifetime of the next:-
- In case the premium is paid by an Particular person – Tax Deduction beneath Part 80C can be allowed for cost of life insurance coverage premium for insuring the lifetime of self, partner and any baby of the person. In case of tax deduction for all times insurance coverage premium of kid, the kid could also be dependent or impartial, male or feminine, married or single. If the feminine baby is married, then additionally the deduction can be allowed. Nevertheless, the Life Insurance coverage Premium paid for insuring the lifetime of brother/sister or dad and mom is just not allowed to be claimed as a deduction beneath Part 80C.
- In case the premium is paid by HUF – Tax Deduction beneath Part 80C can be allowed for cost of life insurance coverage premium of any member of the HUF. (Really helpful Learn: The right way to save Tax by creating HUF)
It is usually to be famous right here that the tax deduction of life insurance coverage premium is allowed within the yr by which the premium is paid and never within the yr by which it turned due. For eg: If life insurance coverage premium is paid prematurely for subsequent 2 years, the profit won’t be divided in 2 separate years however shall be claimed within the yr of receipt itself.
Equally, if the life insurance coverage premium cost is delayed and postponed to the subsequent yr – tax deduction would solely be allowed within the yr of precise cost and never within the yr by which it was truly due.
Most Deduction allowed for Fee of Life Insurance coverage Premium
Deduction beneath Part 80C is allowed provided that the premium paid is upto 10% of sum assured for the coverage issued on or after 1st April 2012. In case of coverage issued earlier than March 31, 2012 deduction shall be allowed just for premiums upto a most of 20% of the sum assured.
The utmost whole quantity that may be claimed as a deduction for cost of life insurance coverage premium is Rs. 1,50,000 for every monetary yr. This deduction of Rs. 1,50,000 is mixed whole cumulative deduction allowed for investments in all specified devices. The preferred of those devices are:-
- PPF Account
- Tax Saving Mutual Funds
- Ta x Saving Fastened Deposits
- Nationwide Financial savings Certificates (NSC)
- Reimbursement of Principal Quantity of House Mortgage
You will need to be aware that deducted claimed earlier shall be disallowed if the coverage is terminated both by discover or by failure to pay any premium in case of
- Single Premium Coverage: Inside 2 years after the graduation date
- Common Premium Coverage: Earlier than premium has been paid for two years.
Tax on Quantity obtained on Maturity of the Insurance coverage Coverage
Any quantity obtained on the time of maturity of the insurance coverage coverage (together with any bonus obtained) is exempted from the levy of any revenue tax beneath Part 10(10D) of the Revenue Tax Act.
Nevertheless, the next quantities obtained beneath a life insurance coverage coverage usually are not exempted from the levy of revenue tax. In different phrases, all quantities obtained besides the next are exempted from the levy of revenue tax:-
- Any quantity obtained beneath a Keyman Insurance coverage Coverage
- The quantity obtained from Life Insurance coverage Coverage if the insured disabled depended predeces the person, the quantity obtained by the person can be deemed because the revenue of that yr of the particular person receiving the quantity [Section 80DD & Section 80DDA]
- Any quantity obtained from Life Insurance coverage Coverage issued on or after 1st April 2003 however on or earlier than 31st March 2012, in respect of which the premium payable for any of the yr throughout the time period of the coverage exceeds 20% of the particular sum assured
- Any quantity obtained from an Life Insurance coverage Coverage issued on or after 1st April 2012 in respect of which the premium payable for any of the years throughout the time period of the coverage exceeds 10% of the particular sum assured. (15% in case the coverage is for insuring the lifetime of a disabled dependent)
The above talked about quantities can be added to the overall revenue of the person and taxed as per the relevant revenue tax slab charges.
It’s to be famous that sub-clause (c) and (d) won’t apply if the quantity obtained is on the demise of the particular person.
Because the revenue tax can be relevant within the above talked about 4 instances, TDS would even be deducted on quantity obtained beneath a life insurance coverage coverage @ 2%
No Tax can be levied and No TDS can be relevant if the quantity obtained is just not lined beneath the above talked about 4 circumstances.
Different Related Factors
- Service Tax levied on the Life Insurance coverage Premium can be allowed to be claimed as a Deduction beneath Part 80C
- The above talked about norms apply to all Life Insurance coverage Insurance policies no matter whether or not such coverage has been taken from Life Insurance coverage Company or another Insurance coverage supplier.