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Central Govt Employees Salary Structure

Tax Benefits

Insurance Policies completely live up to the Phrase “Icing on the Cake!!!”. Insurance policies do not only safeguard your life and health but also gives you tax benefits for the premium paid and maturity amount received.
The very first step of a successful tax or financial planning start with getting yourself adequately Insured.
Let’s see how you can save tax through Insurance Policy in India.

Life Insurance Tax Benefit

Life Insurance Policy is a traditional plan which includes term plans, ULIPS (unit linked insurance plans), money back and whole life cover plan. All the plans except term plan are mix of investment as well as insurance, term plan gives your pure insurance. But for the purpose of taxation all these plans are treated same and the tax treatments of all plans are same.

Tax benefit on Life Insurance Policy

Premium Paid
  • Premium paid is eligible for deduction u/s 80C of the I-T Act.
  • Maximum deduction is Rs.1.50 lakh u/s 80C.
  • Premium must be paid through check, credit card or online transfer, cash payment of premium is not allowed for deduction.
  • Minimum sum assured for claiming deduction should be 10 times of the premium paid.
Insurance Sum Received:
1. On Surrendering Policy before maturity:
In case the policy is surrendered before the maturity than the whole sum received from the Insurer will be taxable, if 5 premiums have not been paid. If you have surrendered the policy after paying 5 premiums than the amount received from the insurer would be tax-free.

 2. On Maturity:
Insurance Sum received on maturity is completely tax-free u/s 10 of the I-T Act.

 3. On the Death of the Policy Holder:
Insurance Sum received on the death of the assesse by his family or legal heirs is completely tax-free u/s 10 of the I-T Act. But a death certificate of the policy holder is required to be given to the insurer along with the other documents to claim the insurance amount.

Health Insurance Tax Benefit or Mediclaim Policy

The earning members of most of the Indian households are one or two while they have dependent children and dependent parents to look after. Due to increasing cost of medical treatment Health Insurance Policy or mediclaim policy has become must for every household. Along with covering the cost of the medical expenses it also gives you tax benefits.

Tax benefit on Health  Medical Insurance

Premium Paid:
Under Section 80D of the I-T Act assesse can claim the deduction for premium paid for Health Insurance or Mediclaim Policy for up t0 Rs.25,000 p.a. for himself, his spouse and his children. In case he also buys Health Insurance or Mediclaim Policy for his dependent parents than a separate deduction of Rs.25,000 will also be allowed for deduction and if his parents are senior citizen (60 years or above) than deduction will be of Rs.30,000. This means an assesse can get maximum benefit of Rs.55,000 u/s 80D.

But to claim the deduction, few conditions have to be met:
  • Assesse should be an individual or HUF (Resident or NRI).
  • The premium is paid by any mode other than cash. Payment by cash does not qualify for deduction.
  • Receipt of Mediclaim Premium is required for claiming deduction as a proof of payment.
Insurance Sum Received:
Any sum received from the insurer against the health insurance policy or mediclaim policy does not constitute your income and thus would be exempt. The sum received from insurer is mere a reimbursement of expenses you have incurred. Thus it would completely be tax-free. Suppose you have received Rs.1 lakh against the mediclaim policy than this amount would not be taxable as your income, since this is just a settlement of the medical expenses you have already incurred and there is no element of the income in your claim.

 Many of the Insurance Companies have started Cashless Health Insurance Schemes, under which you don’t need to pay any amount to the medical institutes. The medical bills are directly paid to the medical institute by TPA/Insurance Company.