Analysing Tax Deductions in India and Exemptions on Life Insurance Policies
April 25, 2018
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Tax deductions in India are bound by the Income Tax Act of 1961 though the laws are subject to change. If you are trying to figure out whether Life Insurance premiums are tax-deductible in India, then the following read will give you a comprehensive idea about the provisions of the Income Tax Act of 1961.
Section 80C/80CCC
Under Section 80C, there are many investments that can help you save on tax. The most popular and beneficial of these is investing in a good Life Insurance policy.
Life Insurance tax benefit under this section is extended to an individual assessee and Hindu Undivided Families (HUF).
Individual assessee refers to the individual himself or herself, spouse and children.
HUF assessee is relevant to any member of the HUF.
The maximum amount that can be exempted from taxation is Rs. 1,50,000.
Deductions on Life Insurance premiums are permissible for only up to 20% of the Sum Assured, if the premium amount paid in a certain financial year for a policy is in excess of 20% of the actual Sum Assured. This is applicable only to policies that were issued before 31st March, 2012.
In case of policies issued on or after 1stApril, 2012, the tax deductions cannot exceed 10% of the Sum Assured.
If the policy is annulled or terminated within 2 years of the commencement of the policy, the benefit claimed under this section will be reversed. This is applicable to all Life Insurance policies with ULIPs being the only exception.
If the ULIP has been annulled or terminated within 5 years of the commencement of the ULIP, the benefit will be reversed.
The maximum amount of deduction that can be claimed under these sections is limited to Rs. 1,50,000.
Section 80D
The extension of tax benefits to individual assessees’ and Hindu Undivided Families (HUF), as specified under Section 80C, is applicable to this section as well.
The qualifying amount under this section is up to Rs 15,000 for self, spouse and dependent children with an additional deduction of up to Rs 15,000 for parents. But for parents who are senior citizens, an amount of up to Rs 20,000 is permissible. This section also provides assessees with an amount of up to Rs 5,000 for preventive health checkups.
Section 80DD
Under this section, disabled dependents are eligible for a deduction of up to Rs 50,000 annually on payment of the premiums. A dependent with a severe disability is eligible for a higher deduction of Rs 75,000.
If you have any further queries or doubts, get in touch with us right now.Disclaimer: This blog is for informative purposes only, while HDFC Sales Private Ltd makes an effort to provide the accurate and reliable information about the products, the Company does not guarantee or certify accuracy and completeness of the information. The company shall not be liable for any loss incurred by any person relying on such information.
How do I check income tax refund status. Does HDFC provide?
Thanks for writing back. Please refer to your specific Insurance Policy for details on IT refund status.