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An individual assesses always wonder what be could his tax implications and the amount of taxes, he would end up paying at the end of the year. People from commercial background find it relatively easy to crack than individuals from other background.

Tax structure and tax planning has always been an intricate and time consuming subject matter for amateurs.  We spent 80 percent of our time in earning incomes and the remaining time we spent on our family and for ourselves. On very few occasion we take out time to understand the X and Y’s of tax structure or planning or our tax liability.  Not to worry, I am going to endeavor on these topics and will assist you where you can save your money or were you can make investment. I believe before making expenditure if we are aware of the tax implications we would atleast take precautions to keep these pointers in our mind before execution.

So that brings us to a question what does our investment comprises of?

In general our Investment comprises of Insurance, Fixed Deposits, Equity Markets, Debt Instruments, Provident Fund, Interest on savings account, National Saving certificates, Government Bonds and many more. It is important to understand the tax implication on these terms and to know our benefits. There are exemptions provided by the government, most popularly section 80C, but it’s our duty to assess whether the income generated on these investments is taxable and its quantum.

There are two sources wherein we need to evaluate our tax liability, at the time of investment and when income accrues on these investments. We shall understand the implication on the above one after the other:


If you are insuring your life and making premium payments (during the previous year) to insurance company (GIC or approved by IRDA), the premium payments is covered under a list of items mentioned under section 80C, wherein the limit stated is upto Rs 100,000 p.a


If you are paying a medical premium for your selves or any other dependent member of your family than the amount upto Rs 15,000 (for non senior citizen) and Rs 20,000 (for senior citizen) is exempted during previous year, only if the amount is paid by cheque (as amended by the Finance Act 2008).

Annuity Plan

Section 80 CCC provides a deduction of up to Rs.10,000/-  to an individual assesses for any amount paid or deposited to effect or keeping in force any annuity plan of LIC for receiving pension from the fund referred in sections 10 (23AAB).  Presently LIC’s Jeevan Suraksha plan is one such plan using such benefit.

However on maturity the amount received will be taxable in the hands of the assessee.

Insurance and Annuity plan is covered by section 80C and their limit together will be Rs 100,000.

For instance, If Ram is paying Rs 60,000 for his life insurance and Rs 50,000 for the annuity then he will be allowed exemption limit upto RS 100,000 and the excess will be taxable in the hands of the assessee.

[Being an assessee can keep in mind that section 10(10d) says if any amount is received from life insurance company, including bonus is non taxable except money received on death or under medical insurance which be taxable]


By providing the benefits to individual the government is promoting the habits of saving in the hands of the investor. As we all know the there is a surge in the household savings pattern in India. Hence more the tax paid by an individual, more the amount of savings made within the economy

This will be an ongoing series and I hope you have got the clarity on Insurance at point of dual tax implication. On the next series we shall focus on more investment fundas and its tax criteria. Please wait till the next chapter

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Published by

Jigar Shah
(Chartered Accountant)
Category Income Tax   Report

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