Answers to Most Frequently Asked Tax Questions in India
- Leave encashment actually received
- Amount equal to salary for the period of leave earned (maximum leaves earned will be 30 days for every year of actual service)
- 10 months average salary. [Avg. salary = salary (basic + DA) of 10 months immediately preceding the retirement or resignation]
- Maximum Rs.3,00,000
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If you buy a policy for yourself and your spouse and children |
You can get a maximum deduction of Rs.25, 000 |
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If you are a senior citizen |
The deduction limit increases to Rs.50,000 |
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If you buy a policy for your parents |
You can get a maximum deduction of Rs.25,000 |
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If your parents are senior citizens |
The deduction limit increases to Rs.50,000 |
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If you buy a policy for yourself, spouse and children and another policy for your parents |
You get two deductions: Up to Rs.25,000 for your policy and Up to Rs.25,000 for your parents’ policy |
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If your parents are senior citizens and you also buy a plan for them |
You get two deductions: Up to Rs.25,000 for your policy and Up to Rs.50,000 for your parents’ policy |
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If both you and your parents are senior citizens and you buy two policies, one covering your family and another for your parents |
You get two deductions: Up to Rs.50,000 for your policy and Up to Rs.50,000 for your parents’ policy |
Tax benefit usually refers to tax laws that provide one with an option to reduce their tax bills, if they clear the eligibility requirements. Tax saving investment benefits can be in any form, like credit, exemption or deduction in the tax bills. The amount of tax saved is also dependent on the tax benefit claimed as there are different forms of savings. Some of the tax saving investment benefits include:
- Exemption from Income
- Deduction from Income
Some of the Tax benefits include:
- Tax benefits under section 80C of the Income Tax Act, 1961, may be available to an individual for the premiums paid subject to the conditions/limits specified therein.
- Benefits received under a life insurance policy may be exempted under section 10 (10D) of the Income Tax Act, 1961, subject to the conditions specified therein. Where the amount paid to the policyholder is not exempt under the provisions of section 10(10D), the said amount will be subject to tax deduction at source in accordance with provisions of section 194DA of the Act.
- For further details, please consult your tax advisor. Tax benefits are subject to change from time to time.
Life insurance is one of the most prominent tax saving investments available today. When you buy an insurance policy, you are entitled to receive tax deductions under Section 80 C of the Income Tax Act 1961.These tax deductions considerably lower your taxable income, which in turn increases your overall savings.
Tax benefits Under Section 80C
Investing in a life insurance policy allows you to avail of several tax benefits under Section 80C. Tax saving terms under this section are:
- You can avail tax deductions up to Rs. 1,50,000 under this section;
- The deduction is allowed up to 10% premium of the sum assured for policies purchased after 1st April 2012;
- For policies issued before 1st April 2012, deductions on premium are allowed up to 20%of the sum assured (even if the holder pays more than 20% of the sum assured in one financial year);
- If the insurance policy is discontinued within two years if its commencement, the tax benefits received would be reversed;
Tax Benefits Under Section 10 (10D)
Under Section 10(10D), any sum received at maturity of a Life Insurance Policy, is exempted from tax. However, this exemption is not applicable to:
- Amount received under Section 80DDA(3) or 80DD(3);
- Maturity benefits received under a Keyman Insurance Policy;
- Sum received under any insurance policy (other than as death benefit) issued on or after April 1, 2003, during the term of which the premium paid is more than 20% of the sum assured;
The premiums paid by you can be considered eligible for tax benefits as available under the provisions of Section 80C, and 10(10D) as applicable.
- Section 80C: Under this Section, a deduction of Rs 1,50,000 can be claimed from your total income.
- Section 10D: Any amount received under an insurance policy including the amount allocated on bonus on the policy is exempted from tax.(* subject to fulfillment of certain conditions)
