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Customer Desk |
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Tax Benefit |
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Life insurance is one of the most popular savings/ investment vehicles in India. An insurance policy offers much more than just tax planning and investment returns. It offers you the ability to plan for unforeseen events that could affect your family's financial problem adversely
Under the Income Tax Act, 1961, the following tax benefits are available for life insurance. The benefits under income tax are of two types
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| 2. |
Exemption from the proceeds |
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Commuted pension: 10(10A)(iii) |
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One-third of the Value at vesting date would be tax-free |
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10(10D) |
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Any sum received from Life insurance policy as maturity proceeds, death benefits. |
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Proceeds of key man insurance is taxable |
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Single premium policies will be taxed as income in the year it is received assuming the premium exceeds 20% of the sum assured. |
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An Insurance policy in respect of which the premium payable for any of the years during the term of the policy exceeds 20 % of the actual capital sum assured will not be eligible for Sec 10(10D) benefit. This will not be applicable for any sum received on the death of a person. |
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Illustration (For resident individual/Woman/Sr. Citizen) |
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| Particulars |
Normal |
Woman |
Sr. Citizen |
| Gross Total Income |
600,000 |
600,000 |
600,000 |
| Deduction u/s. 80C/80CCC |
100,000 |
100,000 |
100,000 |
| Deduction u/s. 80D |
15,000 |
15,000 |
20,000 |
| Total Taxable Income |
485,000 |
485,000 |
480,000 |
| Tax on Income |
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| Upto 1.50/1.80/2.25 lakh |
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| 1.50 lakh - 3.00 lakh |
15,000 |
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| 1.80 lakh - 3.00 lakh |
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12,000 |
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| 3.00 lakh - 5.00 lakh |
37,000 |
37,000 |
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| 2.25 lakh – 3.00 lakh |
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7,500 |
| 3.00 lakh to 5.00 lakh |
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36,000 |
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52,000 |
49,000 |
43,500 |
| Add: Surcharge |
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| Add: Education cess @ 3% |
1,560 |
1,470 |
1,305 |
| Total Tax Payable |
53,560 |
50,470 |
44,805 |
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Note: Income tax rates are applicable for F.Y 2008-09 only. |
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Disclaimer |
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| 1. |
The above are extracts from the Income tax Act, 1961. Please note that tax laws are subject to change and hence before placing reliance on the above, the latest version of the above section should be checked up. It should also be noted that the change in tax laws could have retrospective effect also. |
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This information should be not be construed as tax, legal or investment opinion from BSLI. BSLI would not be responsible in any manner for decisions made on the basis of above information. |
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Please consult your tax advisor for specific suitability of taxation on insurance products. |
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