India Maharashtra Pune Income Tax And Tax Benefits From Life Insurance (punediary.com)

Income Tax And Tax Benefits From Life Insurance

(A.) Income Tax :

The Rate of income tax applicable under the Financial Act 2003 for the financial year 2003- 2004 i.e. assessment year 2004- 2005 in the case of an individual are given below:

Rate of Income-tax :

Income	Rate	Surcharge
Upto 50,000 /-	Nil	-
Rs. 50,001 to 60,000 /-	10%	Nil
Rs 60,000 to 1,50,000	20%	Nil
Above Rs. 1,50,000	30%	*
--	--	--

Rebate in respect of contribution of P.F. Insurnce Premia etc (Section 88)
The assessee being an individual or HUF will be entitled to tax rebate u/s 88 of the Act as under:

Gross total income before deduction under Chapter VI A	Rate of Rebate **
Upto Rs 1.5 Lakh	20%
1.5 Lakh to 5 Lakh	15%
Above Rs. 5 Lakh	NIL

* Surcharge In Income Tax

The amount of Income Tax so computed shall be reduced by the amount of rebate of income tax calculated under Chapter VIIIA (i.e. rebate u/s 88,88B & 88C) and income tax so reduced shall be increased by a surcharge @ 10 % of such income tax where the total income exceed Rs. 8,50,000 /-. However in case of a person having a total income exceeding Rs. 8,50,000/- the total amount payable as income tax on and surcharge on such income shall not exceed the amount payable as Income Tax on total income of Rs. 8,50,000 /- by more that the amount of income that exceed Rs. 8,50,000 /-.

** There is however overall limit of Rs. 1,00,000 /- for savings which will qualify for tax rebate u /s 88 of Income Tax Act. This limit includes minimum investment of Rs. 30,000 /- in eligible issues of capital. The limit for qualifying investment excluding investment made in eligible issues of capital is Rs. 70,000 /-

From the assessment year 2002 - 2003 an individual shall be entitled to a tax rebate of an amount equal to thirty per cent of the aggregate of qualifying investment made u / s 88. If the following two conditionals are satisfied :-

A) Income chargeable under the head salaries (before allowing standard deduction u / s. 16) does not exceed Rs 1,00,000 /- and B) Income chargeable under the head "salaries" is not less 90 percent of gross total income computed before making any deduction under Chapter VI-A

Qualifying Investment eligible for rebate :

Investment qualifying for rebate viz. Insurance Premia. Premium paid towards annuity plans of LIC of India are specified under Section 88 of the Income-tax Act.

1) Premiuns paid to effect or to keep in force an insurance policy on the life of assessee or on the life of the wife or husband or any child (whether minor or major) of the assessee. irrespective of the status of the child: provided the premium paid is not in excess of 20% of the actual capital sum asseured

2) Premium paid to effect or to keep in force a contract for a deferred annuity on the life of the assessee or on the life of the wife or husband or any child (whether minor or major) of the assessee provided that such a contract does not contain a provision for the exercise, by the assured , of an option to receive a cash payment in lieu of the payment of the annuity.

3) Contribution to any provident fund to which the Provident Fund Act.1925 applies or to any provident Fund set up by the Central Government.

4) If the assessee is an employee paticipating in a recognised provident fund his own contribution to such fund in the previous year.

5) If the assessee is an employee participating in an approved superannuation fund. his contribution to such fund in the previous year

6) Any sums deposited in a ten-year account or a fifteen-year account under the Post Office Saving Bank (Cumulative Time Deposits) Rules. 1959. as amemded from time to time.

7) As a contribution for participation by the individual in a Unit Linked Insurance Plan. 1971 of the Unit Trust of India and LIC Mutual Fund (Dhanraksha Plan).

8) Any sums paid in the previous year by the asessee as subscription to National Saving Certificates (VI & VII issues).

9) Any subscription to such Saving Cerificates as defined in section2 (c) of the Govt. Saving Certificate Act, 1959 (i.e. National Saving Certificate VIII issue.)

10) Any payment made by the tax payer towards the cost of purchase or construction of a new residential property will qualify for deduction upto a maximum of Rs. 20,000/- subject to certain conditions.

11) Deposited with National Housing Bank under home loan accont scheme or Pension Fund set up by the National Housing Bank.

12) Notified Annuity Plans of LIC of India or any other insurer

13) Contribution to any pension fund set up by any Mutual Fund notified under clause (23D) of section 10 or UTI.

14) Subscription not exceeding Rs.10,000/- to any units of any mutual fund notified under clause (23D) section 10 of Income-tax Act. 1961 or UTI.

15) Payment made as tution fees to any university college, school or other educational institution situated within India for the purpose of full time education of any child of such individual subject to a maximum 12,000 /- per child limited to two children. This will be applicable from A. Y. 2004-2005.

16) Subscription to equity shares or debentures forming part of any eligible issue of capital by a public company or units of any Mutual Fund referred to in clause (23D) of section 10 and approved by the CBDT. The higher limit of Rs 1,00,000/- for the purpose of availing rebate under this section can be had only when the assessee invests in suchg developing, maintaining & operating infrastructure facilities including telecommunication facilities.

(B) Some important income Tax Benefits available under various plans of Life Insurance are highlighted below

1) Income tax exemption on Maturity / Death Claims proceeds under Section 10(10D) :
Under the provisions of Sub-section 10D of Income tax Act 1961 any sum received under a life insurance policy including the sum allocated by way of bonus on such policy other than any sum received under Sub-section (3) of section 80DD ( i.e. amount to be refunded under Jeevan Aadhar Insurace Plan in case the handicapped dependent predeceases the individual) or under a Keyman Insurance Policy is exempted from income tax. However any sum received under an insurance policy effected on or after 1-4-2003 in respect of which the premium paid in any of the years during the term of the policy exceeds 20% of the actual capital sum assured will no longer be exempted under this section.

2) New Jeevan Suraksha -1 Plan (U/s 80.CCC) :
A deduction to an individual for any amount paid or deposited by him from his taxable income in the above annuity plan for receiving presion (from the fund set up by the Corporation under the Pension Scheme) is allowed. The deduction will be restricted to Rs. 10,000 /-

3) Jeevan Aadhar Plan (Sec. 80DD) :
As per section 80DD, an amount not exceeding Rs. 50,000/- deposited with LIC of India under Jeevan Aadhar Plan for maintenance of an handicapped dependent is eligible for deducation from the total income (Rs. 75000 /- where handicapped dependent is suffering from severe disability)

4) Exemption in respect of commutation of pension under Jeevan Suraksha :
Under Section 10(10A) (iii) of the Income-tax Act . any payment received by way of commutations of pension out of the Jeevan Suraksha Annuity plans is exempt from tax.

5) Rebate of Income- tax on Life Insurance Premium (Section 88)

(a) Life Insurance premia (Section 88(2) (i) :
The insurance premia is paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or his child. This child may be minor or adult child and also includes a married daughter. In the case of HUF, premium paid on the life any member thereof, is eligible for rebate.
Provided premium paid is not in excess of 20% of capital sum assured.

(b) Contribution to deferred annuity Plans (Section 88 (2) (ii) :
Any sums paid by an individual in order to effect or to keep in force a contract for deferred annuity, on his own life or his spouse or any child, provided such contract does not contain a provision for the exercise by the insured of an option to received a cash payment in lieu of the payment of annuity.

(c) Contribution to Pension / Annuity Plans (Section 88 (2)) (xiiia) :
Contribution to New Jeevan Dhara-I and New Jeevan Akshay - I Schemes of LIC are qualified for rebate under this section.

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