How DTC (Direct Tax Code) affect Life Insurance Policies - old and new? Please explain with examples.
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How DTC (Direct Tax Code) affect Life Insurance Policies - old and new? Please explain with examples.
- Under New Direct Tax Code - You can save tax only for the premium of policies which gives a life cover of at least 20 times of the annual premium. If any life insurance policy is not met this condition you will not get tax exemption for the premium amount and also the income arise from the policy is taxable.
- At present life insurance policies are exempted under section 80C of income tax act and you can get exemption of Rs. 1,00,000 for life insurance and other tax free investments. But under New Direct Tax Code the maximum exemption limit is Rs. 50000 for life insurance, Tuition fee of children and Medical Insurance together.
All life insurance policies would be taxed on maturity as normal income, unless received on death of the life insured, or on maturity at the end of the policy (only if the premium payable in any year does not exceed 5% of the sum assured). Unfortunately, the amended law would apply to all insurance policy proceeds after 1 April 2010, irrespective of when the policy was taken. All existing policies maturing after that date would be affected.Quote:
Originally Posted by Madhura
Also, if you are paying an annual life insurance premium and health insurance premium totalling at least Rs50,000, the deduction would be limited to Rs50,000 against the current available deduction limit of Rs1.15 lakh (1 lakh for life insurance premium and Rs15,000 for health insurance premium).
The new DTC will be applicable only to Life Insurance policies taken after 1/04/2012 (or any other date as specified by Govt.) subject to the DTC will be passed by the Govt.. All the existing Life insurance policies continue to enjoy the tax benefits up to 1 Lac(As per the tax laws) till the completion of the policy term.
Source - livemint.com