Insurance
policies whether it is Life Insurance or Health Insurance, not only safeguard
your life and health but also give you tax benefits for the premium paid and
maturity amount received. The first step of a financial planning start with
getting yourself adequately insured.
Life
Insurance Policy is a traditional plan which includes term plans, ULIPS (unit
linked insurance plans), money back and whole life cover plan. All the above
plans are combination of investment as well as insurance except term plan which
gives you pure insurance.
*Tax
Benefits on Life Insurance Policies
- Premium paid is eligible for deduction u/s 80C of the I-T Act.
- Maximum deduction is Rs.1.50 Lakh u/s 80C.
- Premium must be paid through cheque, credit card or online transfer, cash payment of premium is not allowed for deduction.
- Deduction will be allowed only for premiums upto a maximum of 10% of the sum assured for policy issued on or after April 1, 2012. In case of policy issued before March 31, 2012, deduction will be allowed only for premiums upto a maximum of 20% of the sum assured.
Insurance Sum Received
On Surrendering Policy before maturity:
In case the policy is surrendered before the maturity
than the whole sum received from the Insurer will be taxable, if 5 premiums
have not been paid. If you have surrendered the policy after paying 5 premiums
than the amount received from the insurer would be tax-free.
On Maturity:
Insurance Sum received on maturity is completely
tax-free u/s 10 of the I-T Act.
On the Death of the Policy Holder:
Insurance Sum received on the death of the assesse by
his family or legal heirs is completely tax-free u/s 10 of the I-T Act. But a
death certificate of the policy holder is required to be given to the insurer
along with the other documents to claim the insurance amount.
*Tax
benefits on Health Insurance Policies:
Due
to increasing cost of medical treatment, Health Insurance or Mediclaim policy
has become must for every household. Along with covering the cost of the
medical expenses it also gives you tax benefits.
Tax
benefits
Under
Section 80D of the IT Act assesse can claim the deduction for premium paid for
Health Insurance or Mediclaim Policy for up to Rs.25,000/- per annum for
himself, his spouse and his children. If he also buys Health Insurance or
Mediclaim for his dependent parents then a separate deduction of Rs.25,000/-
will also be allowed for deduction and if his parents are senior citizen (60
years or above) than deduction will be of Rs.30,000/-. This means an assesse
can get maximum benefit of Rs.55,000/- u/s 80D.
Insurance
Sum Received
Any
sum received from the insurer against the health insurance policy or mediclaim
policy does not constitute your income and thus would be exempt. The sum
received from insurer is a reimbursement of expenses you have incurred. Thus it
would completely be tax-free.
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