FAQs on Tax Benefits

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• Is there any Tax Benefit on the premiumA regular payment made to the insurance company to keep the policy in force. I pay for my life insurance policy?

  Deduction is available under Section 80C of Income Tax Act, 1961 for the premiumA regular payment made to the insurance company to keep the policy in force. paid (max. up to 20% of sum assuredThe sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured.) on life insurance policies with a maximum annual ceiling of Rs. 1,00,000, irrespective of the Gross Total Income.

• After the maturity of my policies, will the maturity proceeds be taxable?

  Under section 10(10D) of Income Tax Act, 1961 maturity benefits are tax free in the hands of policyholders if, at any point of time during the policy life, premiums paid in any year do not exceed 20% of the basic Sum AssuredThe sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured..

• I pay the premiumA regular payment made to the insurance company to keep the policy in force. on policy for my wife/husband, can I claimNotification to an insurance company that payment of an amount is due under the terms of the policy. Tax benefits?

  Life insurance premiumA regular payment made to the insurance company to keep the policy in force. paid by you for your wife/husband's policy qualifies for a deduction under Section 80C of the Income Tax Act, 1961.

• If I stop paying premiums on my life insurance or pension policies, can I claimNotification to an insurance company that payment of an amount is due under the terms of the policy. Tax Benefits?

  If you stop premiumA regular payment made to the insurance company to keep the policy in force. payments of your policy, it amounts to discontinuation of the policy and disqualifies for Income Tax benefits.

• If I purchase a Unit Linked Insurance Plan (ULIP) and I choose to discontinue my policy, can I claimNotification to an insurance company that payment of an amount is due under the terms of the policy. any tax benefits?

  If you chose to discontinue a Unit Linked Insurance Plan before paying for 5 years from commencement of policy, you are not entitled to any tax benefits in the previous year in which the taxpayer terminates the plan. The quantum of deduction already taken in the preceding years would be deemed as the income of the taxpayer in the year in which policy is terminated.

• What are the Tax benefits available on medical insurance premiums?

  In computing the total income of an individual or HUF, deduction is allowed for any sum paid by any mode other than cash out of his income chargeable to tax

  • to effect or to keep in force an insurance on the health of the individual, his or her spouse or dependent children or member of HUF, and
  • to effect or to keep in force an insurance on the health of the parent or parents of the individual

  Deduction amount - Up to Rs. 15,000 for self, spouse, children and Rs. 15,000 for parents. (Rs. 20,000 for parents if they are senior citizens).

• Is Service Tax applicable on premiums paid on insurance products?

  All premiums and charges are subject to applicable taxes including service tax, education cess and secondary & higher education cess as applicable under the prevailing tax laws.

• What are the Tax Benefits available on pension plans?

  Under section 80C, you can avail of a maximum benefit of up to Rs. 1 lakh on the premiumA regular payment made to the insurance company to keep the policy in force. paid towards a pension plan. On maturity, one-third of the maturity amount withdrawn in form of cash is tax-free. Monthly pension receipts will be treated as income in the hands of the assessee and taxed accordingly.

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