Income-tax and tax benefits from life insurance

INCOME-TAX AND TAX BENEFITS FROM LIFE INSURANCE

 

A] INCOME-TAX RATES FOR ASSESSMENT YEAR 2014-2015 (FINANCIAL YEAR 2013-2014)

   Surcharge Cess                  :  In the cases of persons covered under the above categories having a total income exceeding one crore rupees, the income tax as calculated above be increased by a surcharge at the rate of ten per cent of such income- tax.  

   Education Cess                  :  An additional surcharge called as 'Education Cess' is levied at the rate of 2% on the  amount of Income tax in all cases shall be levied.  

   Secondary and Higher    :  An additional surcharge, called the "Secondary and Higher Education Cess on income - tax" at the rate of 1% of income-tax and surcharge (not including the "Education Cess  on Income - tax") in all cases shall be levied.

B] SOME IMPORTANT INCOME TAX BENEFITS AVAILABLE UNDER VARIOUS PLANS OF LIFE  INSURANCE ARE HIGHLIGHTED BELOW:

     1)  Deduction allowable from Income for payment of Life Insurance Premium   (Sec. 80C).

          (a) Life Insurance premia paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or any child of assessee & in the case of HUF, premium paid on the life of any member thereof  under an insurance  policy , ( other than a contract for a deferred annuity,) issued on or before  the 31st day of  March  2012   shall be eligible for deduction only to the extent of 20% of the actual capital sum assured.

           (b) Life Insurance premia paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or any child of assessee & in the case of HUF, premium paid on the life of any member thereof , under an   insurance policy , ( other than a contract for a deferred annuity,) issued on or after  the 1st day of  April  2012    shall be eligible for deduction only to the extent of 10% of the actual capital sum assured. 

Where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is -

(i) a person with disability or a person with severe disability as referred to in section 80U, or

(ii) suffering from disease or ailment as specified in the rules made under section 80DDB, deduction under this section is allowed only to the extent of 15% of the actual capital sum assured.

          (c) Contribution to deferred annuity Plans in order to effect or to keep in force a contract for deferred annuity,  on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an  option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for deduction.

           (d) Contribution to Annuity Plans - New Jeevan Dhara , New Jeevan Dhara - I & Jeevan Akshaya - VI

     2) Jeevan Nidhi Plan & New Jeevan Suraksha - I Plan (U/s. 80CCC)

A deduction to an individual for any amount paid or deposited by him from his taxable income in the above  annuity plans for receiving pension (from the fund set up by the Corporation under the Pension Scheme) is allowed.        

NOTE: The aggregate amount of deduction under u/s 80C, 80CCC & 80CCD(1) shall not in any case exceed one lakh  Rupees .    However, there is no sectoral cap i.e. the limit of Rs.1,00,000/- can be exhausted by paying premium under any of the said sections.

.

     3) Deduction under section 80D

a)        Deduction allowable upto Rs.15,000/-  if an amount is paid to  keep in force an insurance on health of assessee or his family (i.e. Spouse & dependent children) or any contribution made to the central Government Health Scheme or on account of Preventive health check - up of the assessee or his family .

 b)       Additional deduction upto Rs.15,000/- if an amount is paid to keep in force an insurance on health of parents or  on account of Preventive health check - up of the parent of the assessee, whether dependent or not .

c)        In case of HUF,  deduction allowable upto Rs.15,000/- if an amount is paid to  keep in force an insurance on health of any member of that HUF 

d)       If the sum specified in (a) or (b) or (c) is paid to effect or keep in force an insurance on the health of any person specified therein who is a senior citizen, then the deduction available will be up to Rs.20,000/-. Here senior citizen means the person who is of sixty year or more during the previous year.

e)        e) In Case the amounts are paid in (a) or (b) or (c) on account of preventive health check up , the deduction for such amounts shall be allowed to the extent it does not exceed in aggregate Rs. 5,000 /-.

f)        f) For the purpose of deduction , the payment shall be made by

                    i.            i. Any mode, including cash. In respect of any sum paid on account of preventive health check up .

                                ii.            Any mode other than cash in all other cases.

g)        g) The insurance as mentioned above shall be in accordance with the scheme framed by

                    i.            i. The General Insurance Corporation of India as approved by the Central Government in this behalf or;

                                ii.            Any other insurer and approved by the Insurance Regulatory and Development Authority.

4)  Jeevan Aadhar Plan (Sec.80DD) :

 Deduction from total income upto Rs.50000/- allowable on amount deposited with LIC under Jeevan Aadhar Plan for maintenance  of an handicapped dependent  (Rs.1,00,000/- where handicapped dependent is suffering from severe disability)

 5) Exemption in respect of commutation of pension under Jeevan Suraksha &  Jeevan Nidhi Plans:

         Under Section 10(10A) (iii) of the Income-tax Act, any payment received by way of commutations of pension out of the Jeevan Suraksha & Jeevan Nidhi Annuity plans is exempt from tax.

6) Income tax exemption on Maturity/Death Claims proceeds under Section 10(10D)

As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a Life Insurance Policy, including the sum allocated by way of bonus on such policy is exempt from tax where the sum is received as a death benefit However, to get exemption under above section for sum received other than death benefit 

i) Policy shall not be issued under Section 80DD(3), or

ii) Policy shall not be issued as a Keyman Insurance Policy, or

iii) policy which has been issued on or after April 1, 2003 and if the premium paid in any of the years during the term of the policy shall not exceed 20% of the Actual Capital Sum Assured.

iv) policy which has been issued on or after April 1, 2012 and if the premium paid in any of the years during the term of the policy shall not exceed 10% of the Actual Capital Sum Assured. 

Where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is— 

(a) a person with disability or a person with severe disability as referred to in section 80U, or

(b) suffering from disease or ailment as specified in the rules made under section 80DDB, exemption under this section shall be available only if the premium payable in any of the years is not more than 15% of the actual Capital Sum assured. 

Under the provisions of section 10(10D) of the Income-tax Act, 1961, Maturity/Death claims proceeds of life insurance policy, including the sum allocated by way of bonus on such policy (other than amount to be refunded under Jeevan Aadhar Insurance Plan in case of handicapped dependent predeceases the individual or amount received under a Keyman Insurance Plan) ,is exempted from income- tax. However any sum (not including the premium paid by the assessee ) received other than death claim under an insurance policy issued on or after the 1st day of April 2003 but on or before the 31st day of March, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured will no longer be exempted under this section . Further any sum (not including the premium paid by the assessee ) received other than death claim under an insurance policy issued on or after the 1st day of April 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured will no longer be exempted under this section . Where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is-

(i) a person with disability or a person with severe disability as referred to in section 80U, or

(ii) suffering from disease or ailment as specified in the rules made under section 80DDB, if the premium payable for any of the years during the term of the policy exceeds fifteen percent of the actual capital sum assured the exemption under this section will not be available.