Income Tax benefits

Income Tax benefits

How Insurance can help you save on Income Tax

We make several different investments to ensure we are well-provided for in the future. Whether it is your retirement plan, your child’s education plan, or your wedding expenses, your investments are geared towards providing a safe future.

A very important investment to make is insurance. Both life and health insurance are essential to protect not only your family but also your investments and income. Life insurance provides a shield to your family in case of any unfortunate scenario, whereas health insurance protects your investments and savings by compensating in case of a medical emergency.

Insurance is a smart investment, not only because it provides safety to the family, but also because it provides tax benefits. Let us understand the tax benefits from insurance in detail.


What are Income Tax benefits?

To reward certain types of investments, the Income Tax Act gives a deduction. A deduction means a sum that can be reduced from your total income. Income Tax is calculated on the net income after considering all different types of deductions.

For example, if your total income including interest income and salaried income is Rs. 5,50,000 and you have total deductions of Rs. 2,00,000 under different sections, Income tax will be calculated on Rs. 3,50,000. To put this in a formula,

Taxable Income = Total Income – Total Deductions


What deductions are available on Insurance?

These deductions can be classified into two types: life insurance and health insurance.


Life Insurance:

The premium paid for any life insurance policy gets a deduction under Section 80C of the Income Tax Act. This deduction is available up to Rs. 1.5 lakh. However, this deduction is available only if the total premium paid does not exceed 10 percent of the sum assured as mentioned in the insurance policy.

The deduction under Section 80C is available for all types of insurance:

•    Term insurance

•    Unit Linked Insurance Plan (ULIP)

•    Endowment policies

Another deduction available is for a premium paid to any insurance company for a pension plan. This plan gives a monthly pension after the policyholder reaches a certain age. This deduction is given under Section 80CCC of the Income Tax Act. It is restricted to Rs. 1.5 lakh. However, the total benefit under Section 80C and 80CCC is restricted to Rs. 1.5 lakh.


Health Insurance:

Any amount paid as premium to an insurance company for a health insurance policy gets a deduction under Section 80D of the Income Tax Act. This deduction depends on the person for whom insurance premium is paid. It can be simplified in the form of a table.


 Premium Paid For

 Maximum Deduction Allowed

 Self, spouse, dependent children

 Rs. 25,000


 Rs. 25,000

 Self, spouse, dependent children 
 where  self and spouse are senior   citizens

 Rs. 50,000

 Senior citizen parents

 Rs. 50,000


Will I have to pay Income Tax on benefits received from the Insurance company?

Any amount received on a life insurance policy is exempt from Income Tax. This is provided the premium amount is not more than 10 percent of the sum assured.

Any amount received on raising a health insurance claim with the insurance company is treated as a reimbursement of medical expenses and hence is not charged to tax.

Disclaimer: IndiaNivesh Insurance Brokers Private Limited: Registered with Insurance Regulatory & Development Authority License No. 144 – Direct Insurance Brokers (Life & General) valid up to 6th April 2021 CIN :- U67200MH2003PTC138850 Reg Office A-302 Peninsula Bussiness Park, Senapati Bapat Marg, Lower Parel- 400013. Disclaimer: We are only distributors of Mutual Funds, IPO, Corporate Deposits & Fixed Income Products & PMS is not offered for commodity segment. "Investment in securities market are subject to market risks, read all the related documents carefully before investing


ELSS - Equity Linked Savings Scheme

Want to save upto ₹ 46,800 in tax this year? Here’s how Who doesn’t like to save tax? And if you can save tax and earn equity-like returns at the same time wouldn’t that be great? That’s where ELSS or equity-linked savings schemes come in. With ELSS, you can save up to ₹ 46,800 a year in tax if you are in the highest tax bracket. What’s an ELSS? An ELSS is just another equity mutual fund with two key differences. Like any other equity mutual fund, an ELSS invests a large portion of its portfolio in equity. But: 1. An ELSS comes with a lock-in period of three years 2. And, more important, it offers tax deductions on investments of up to ₹ 1.5 lakh under 80c of the Income Tax Act. That’s why ELSS is also called a tax-saving fund. How can you save tax with ELSS? To encourage investments, Section 80c of the Income Tax Act allows tax-payers to claim deductions for investments of up to ₹ 1.5 lakh in a wide range of instruments, including fixed deposits, PPF, postal savings and ELSS. You can invest the amount in one or more of the instruments. For example, you can choose to put the entire ₹ 1.5 lakh in ELSS or you can spread it over across different assets. The amount you invest under section 80c is reduced from your total taxable income. For example, if your taxable income is ₹ 6,50,000, and you invest ₹ 1.5 lakh in ELSS, then you need to pay tax only on ₹ 5,00,000. If you are in the highest tax slab of 30%, your savings add up to ₹ 46,800 in a year. Features of ELSS You can invest in ELSS either through a systematic investment plan (SIP) or lump sum. Take note, however, that each SIP investment in ELSS will have a three-year lock-in ELSS comes with two options – dividend and growth. Returns from both are taxed differently. Dividend income from investments in equity schemes are tax-free in the hands of investors, but the mutual fund house pays a 10% equity dividend distribution tax, which reduces your returns The returns from an ELSS are treated as long-term capital gains since you have held it for over a year. LTCG of up to ₹ 1 lakh are tax-free, and gains of over ₹ 1 lakh are taxed at 10% This makes ELSS a good choice because it combines equity-like returns with excellent tax-efficiency. What’s more, among the 80c options, ELSS comes with the lowest lock-in period (for example, tax-saving FDs have a 5-year lock in, NSC has a 6-year lock-in and PPF matures after 15 years) To claim tax benefits, you must invest the entire amount in the financial year. So, if you would like to save tax with ELSS for FY18-19, you must make your investment by March 31, 2019 Happy investing!

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How to maximise your tax savings?

How to maximise your tax savings?  As tax season approaches, the first question on everyone’s mind is how to save tax. One of the easiest ways to save tax in India is claiming deductions on your income. By following these income tax saving tips, you can end up saving a significant amount of tax.  Here are some ways to save tax in India.   How to save Income Tax in India using deductions:   Deductions are a reduction from your taxable income. There are several provisions of the Income Tax Act which help you reduce taxable income.   Section 80C: This is by far the most popular section. It covers a wide range of investments and expenses that provide you ways to save tax. The deduction is limited to Rs. 1,50,000. Some of the investments you can make to save tax in India under Section 80C are:   Public Provident Fund (PPF) Employee Provident Fund (EPF) Tax saving fixed deposit (FD) Equity Linked Saving Scheme (ELSS) National Savings Certificate (NSC) Senior Citizen Savings Scheme (SCSS) Principal repayment on home loan* Tuition fees for children Stamp duty and registration fees on the purchase of a house Sukanya Samriddhi Yojna (SSY)   Section 80CCC: Investment in an annuity plan by Life Insurance Corporation (LIC) or any other insurer gets a deduction under this section. Together with Section 80C, you can claim a total deduction of Rs. 1,50,000.   Section 80CCD Investment in the National Pension Scheme gets a deduction of Rs. 50,000   Section 80D: The premiums you pay towards health insurance for yourself, spouse and dependent children are tax deductible. If you are under 60, you can claim a maximum deduction of Rs 25,000. If you are a senior citizen, you can claim a deduction of up to Rs 50,000. You can also claim an additional deduction for premiums you are paying towards your parents’ health insurance. If your parents are under 60, you can claim an additional deduction of Rs 25,000. If they are above 60, you can claim Rs 50,000 as a deduction.   Section 80DD/Section 80U: These sections give a deduction for disability either to the person (80U) or for a person dependent on the taxpayer.   Section 80DDB: If any money has been spent on treating specified disabilities, you can get a deduction between Rs. 40,000 to Rs.1,00,000 depending on the age of the person getting treated.   Section 80E: Tax rebate on education loans are only valid up to eight years starting from the year you begin repaying the loan. If your loan tenure exceeds eight years, then you cannot claim a deduction for interest paid beyond the eight years.  Note that if you repay the loan before the eight-year tenure, then tax deduction will be allowed for that period only.   Section 80G: Amounts paid to charitable institutions etc. as donations get a deduction up to a certain limit depending on the charity you donate to.   Section 80GG: -          House rent allowance is part of your salary, and you can claim a deduction for HRA. However, if you pay rent, but do not receive HRA from your employer, you can claim deduction under Section 80GG towards the rent you pay.   Section 80GGA: -          Amounts paid for scientific research and development get a deduction of the amount paid.   Section 80TTA: Interest on savings bank or post office account gets a deduction up to Rs. 10,000. This deduction is allowed on interest earned – From a savings account with a bank, co-operative bank or post office Section 80TTB: Interest on savings and fixed deposit accounts held by senior citizens in a bank, co-operative bank or post office gets a deduction of Rs. 50,000. How to save tax in India using exemptions:   Another way to be tax efficient is to ensure you earn tax-exempt income   Dividend income from equities and mutual fund together is exempt up to Rs. 1 lakh (This is the aggregate amount of exemption for both equity and MF) Interest on Public Provident Fund/Employee Provident Fund and withdrawals Amounts received on life insurance policies (Link to last week’s Tax Thursday Allowances for salaried employees   By ensuring you make the right investments and are aware of the Income Tax rules, you can significantly save on your tax expenses.   Note: *Annual interest component of up to Rs. 2 lakh (Rs. 3 lakh for senior citizens) can be claimed as a deduction against income under Section 24 of the Income Tax Act 

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