Tax Benefits

Life insurance policies can be useful tax planning tools, because the policy holder is eligible for tax benefits under the Income Tax Act 1961 (Act). Though there are multiple modes for saving tax, life insurance is one of the most effective tax planning instrument. Plans from Max New York Life Insurance can be used for protection, long term savings and tax planning. There are two kinds of income tax benefits available to individuals with respect to long term savings being made in Life Insurance policies:

• Deductions
  • 80C/80CCC/80CCE:
    • Benefit is available to Individual assessee and Hindu Undivided Family assessee.
      • In case of individual assessee - Himself/herself, spouse, children of such individual
      • In case of HUF assessee - any member of HUF
    • If the amount of premiumA regular payment made to the insurance company to keep the policy in force. paid in a financial year for a policy is in excess of 20% of the actual capital sum assuredThe sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured., then deduction will be allowed only for premiums upto 20% of the sum assuredThe sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured..
    • This benefit will be reversed if the policy is terminated/cease to be inforce within 2 years for traditional products and 5 years for ULIP products after the date of commencement of policy.
    • Sec 80CCE - Maximum amount of deduction that an assessee can claimNotification to an insurance company that payment of an amount is due under the terms of the policy. under Sections 80C, 80CCC and 80CCD will be limited to Rs. 100,000.
  • 80D
    • Benefit is available to Individual assessee and Hindu Undivided Family assessee.
      • In case of individual assessee - Himself/herself, spouse, dependent children and parents of such individual
      • In case of HUF assessee - any member of HUF
    • The qualifying amounts under Section 80D for self, spouse and dependent children is upto Rs. 15,000/- and additional deduction upto Rs. 15,000/- for the parents. However, a higher amount of upto Rs. 20,000/- is permitted for parents, if they are senior citizens.
  • 80DD: Premiums paid for disabled dependent are eligible for deduction up to Rs. 50,000 every year. A higher deduction of Rs. 75,000 shall be allowed, where such dependent is a person with severe disability.
• Exemptions
  • 10 (10D): any sum received under a life insurance policy, including the sum allocated by way of bonusDividends paid to shareholders from funds created out of additional profits realised by the company. on such policy will be exempt from tax. However, this rule does not apply to following amounts:
    • Sum received under Section 80DD(3), or
    • A sum received under a Keyman Insurance Policy, or
    • Any sum received other than as death benefit under an insurance policy which has been issued on or after April 1 2003 and if the premiumA regular payment made to the insurance company to keep the policy in force. paid in any of the years during the term of the policy is more than 20% of the sum assuredThe sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured..

DISCLAIMER:

• This information should not be construed as expert tax, legal or investment opinion from Max New York Life Insurance Company Limited. Max New York Life Insurance Company Limited would not be responsible in any manner for decisions made on the basis of above information.
• Please consult your tax advisor for specific suitability of taxation on insurance products.

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