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    Categories: Income Tax

Tax Benefit on Life & Health Insurance, Premium Payments & Claims

Are you looking for an investment?

What is your main priority “tax saving” or “getting better returns”?

Obviously! Both are equally important, but getting such an investment is not an easy task.

But wait! Here is an investment tool that will surely amaze you by giving the above dual benefits with no extra cost.

Tax savers call it as “Investment in LIP (Life insurance and Health policies)”.

Life and Health insurance policies are generally invested for protection against certain mis-happenings that may happen with no notice. We all buy these policies and pay premium amount on these .Also, these are the major part of the contributions that we save for financial security of our family and heirs. But these contributions subject to certain tax provisions that every accessee has to follow and know about the available tax benefits of investing in them.

How it would help me in taxation sense?

To plan a major tax saving a summarized knowledge of some sections is required of the IT Act.

Section 80C:  If an accessee by investing 20 lakh in LIP pays a premium of Rs 1.2 lakh in the aforesaid year, can claim a full amount deduction of 1.2 lakh.

Cut Short: Section gives a privilege to claim a deduction of up to an amount being 10% of the “sum assured” up to a max amount of Rs 1.5 lakh.

80CCC/80CCD: Provides exemptions to investment in annuity and pension plans.

80D: Payment made for premium of medical insurance for self or parents is exempted with the max limit of Rs 30000 including payments made for health checkups.

10(10D): Amount received against maturity of the policy along with bonus tax benefit is wholly exempted from tax provided that separate provisions would be followed for policy issued before 2012 and after 2012.

So, after applying these deductions one can get a big relief in tax amount payable but these deductions can be claimed only in the year of actual payment as they are not included in IT on due basis.

Am I eligible for deduction?

These tax benefit by fortune are made for individual/HUFs only .For individual deduction can be claimed for investment made by accessee for self, spouse or for children.

While for an HUF deduction can be claimed for any policy taken for an HUF member.

What if the policy is surrendered or cancelled before minimum hold period?

If a similar situation arises, the accessee’s application for previous year deductions would stand cancelled and would be considered as an income of the present year with no further deductions and benefits.

Does it apply to Keyman Insurance Policies also?

As these deductions are only available to Individuals and HUFs , an employer/firm cannot claim a deduction against insurance policy investment done for any employee under these sections.

What about maturity returns and bonus, is their any tax benefit?

Section 10(10D) guides about exemption of certain policy maturity returns and bonuses given while the policies not covered by this sections are subjected to deduct TDS (Tax deducted at source).

Hope the above information improved your knowledge and will strike you the time during preparation of your next IT return.

Team TaxReturnWala: