Articles explains Income-Tax Rates For Assessment Year 2020-21 (Financial Year 2019-20) and Some Important Income Tax Benefits Available Under Various Plans of Life Insurance. Deduction discussed are Deduction allowable from Income for payment of Life Insurance Premium (Section 80C), Jeevan Nidhi Plan & Jeevan Suraksha Plans (Section 80CCC), Deduction under section 80D, Jeevan Aadhar Plan (Section 80DD), Exemption in respect of commutation of pension under Jeevan Suraksha & Jeevan Nidhi Plans and Income tax exemption on Maturity/Death Claims proceeds under Section 10(10D).

INCOME-TAX RATES AND TAX BENEFITS FROM LIFE INSURANCE

A] Income-Tax Rates For Assessment Year 2020-21 (Financial Year 2019-20)

Income Slabs Tax Rates
Individual & HUF below age of 60 years Individual 60 years of age and more but less than 80 years Individual 80 years of age and more
Income up to
Rs. 2,50,000
Income up to Rs.3,00,000 Income up to Rs.
5,00,000
NIL
Rs. 2,50,001 to Rs. 5,00,000 Rs. 3,00,001 to Rs. 5,00,000 5%
Rs.5,00,001 to Rs. 10,00,000 Rs. 5,00,001 to Rs. 10,00,000 Rs.5,00,001 to Rs. 10,00,000 20%
Above Rs. 10,00,000 Above Rs. 10,00,000 Above Rs. 10,00,000 30%

Surcharge :

10% of income tax, where total income exceeds INR 50 lakh up to INR 1 crore. 15% of income tax, where the total income exceeds INR 1 crore up to INR 2 crore. 25% of income tax, where total income exceeds Rs 2 crore upto Rs 5 crore and 37% of income tax, where total income exceeds Rs 5 crore.

Health and Education Cess: 4% of Income Tax plus Surcharge.

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B] Some Important Income Tax Benefits Available Under Various Plans Of Life Insurance

1)  Deduction allowable from Income for payment of Life Insurance Premium (Sec. 80C).

(a) Life Insurance premium 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 any child of assessee & in the case of HUF, premium paid on the life of any member thereof under an insurance policy, (other than a contract for a deferred annuity,) issued on or before the 31stday of March 2012 shall be eligible for deduction only to the extent of 20% of the actual capital sum assured or actual premium paid whichever is

(b) Life Insurance premia 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 any child of assessee & in the case of HUF, premium paid on the life of any member thereof, under an insurance policy, (other than a contract for a deferred annuity,) issued on or after the 1st day of April 2012 shall be eligible for deduction only to the extent of 10% of the actual capital sum assured or actual premium paid whichever is less..

Where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—

(i) a person with disability or a person with severe disability as referred to in section 80U, or

(ii) suffering from disease or ailment as specified in the rules made under section 80DDB,

deduction under this section is allowed only to the extent of 15% of the actual capital sum assured or actual premium paid whichever is less.

(c) Contribution to deferred annuity plans in order to effect or to keep in force a contract for deferred annuity, on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for deduction.

(d) Contribution to Annuity Plans – New Jeevan Dhara , New Jeevan Dhara-I & Jeevan Akshaya – VI.

2) Jeevan Nidhi Plan & Jeevan Suraksha Plans (U/s. 80CCC)

A deduction to an individual for any amount paid or deposited by him from his taxable income in the above annuity plans for receiving pension (from the fund set up by the Corporation under the Pension Scheme) is allowed.

NOTE: The aggregate amount of deduction under u/s 80C, 80CCC & 80CCD(1) shall not in any case exceed one lakh fifty thousand Rupees.

3) Deduction under section 80D

a) In case of the individual, Rs. 25,000 for himself and his family

b) If individual or spouse is 60 years old or more the deduction available is Rs 50,000

c) An additional deduction for insurance of parents (father or mother or both, whether dependent or not) is available to the extent of Rs. 25,000 if less than 60 years old and Rs 50,000 if parents are 60 years old or more.

d) For uninsured super senior citizens (80 years old or more) medical expenditure incurred up to Rs 50,000 shall be allowed

e)  A deduction of Rs. 5000 will be allowed under this section for payment of preventive health check-up of either the individual himself or his family members which includes spouse, parents and dependent children.This deduction is NOT in addition to the deduction of Rs.25000/50000 stated above, but is included in the above deduction

f) For the purpose of deduction , the payment shall be made by

i. Any mode, including cash, in respect of any sum paid on account of preventive health check up.

ii. Any mode other than cash in all other cases.

g) The insurance as mentioned above shall be in accordance with the scheme framed by

i) the General Insurance Corporation of India as approved by the Central Government in this behalf or;

ii) Any other insurer and approved by the Insurance Regulatory and Development Authority.

4) Jeevan Aadhar Plan (Sec.80DD) :

Deduction from total income up to Rs. 75000/- allowable on amount deposited with LIC under Jeevan Aadhar, Jeevan Vishwas plan for maintenance of an handicapped dependent (Rs. 1,25,000/- where handicapped dependent is suffering from severe disability)

5) Exemption in respect of commutation of pension under Jeevan Suraksha & Jeevan Nidhi Plans:

Under Section 10(10A) (iii) of the Income-tax Act, any payment received by way of commutations of pension out of the Jeevan Suraksha & Jeevan Nidhi Annuity plans is exempt from tax.

6) Income tax exemption on Maturity/Death Claims proceeds under Section 10(10D)

As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a Life Insurance Policy, including the sum allocated by way of bonus on such policy is exempt from tax where the sum is received as a death benefit. To get exemption under above section for sum received other than death benefit following conditions to be satisfied:

  • Policy shall not be issued under Section 80DD(3), or
  • Policy shall not be issued as a Key man Insurance Policy, or
  • policy which has been issued on or after April 1, 2003 and the premium paid in any of the years during the term of the policy not exceeding 20% of the Actual Capital Sum Assured.
  • policy which has been issued on or after April 1, 2012 and the premium paid in any of the years during the term of the policy not exceeding 10% of the Actual Capital Sum Assured.
  • Where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—

(i) a person with disability or a person with severe disability as referred to in section 80U, or

(ii) suffering from disease or ailment as specified in the rules made under section 80DDB,

exemption under this section shall be available only if the premium payable in any of the years is not more than 15% of the actual Capital Sum assured.

If the premium payable in any of the years is more than 15% of the actual Capital Sum assured, the Net Return i.e Maturity proceeds minus initial investments amount will be fully taxable under head Income from Other Sources. Further also note that if the total payment of maturity proceeds is more than Rs. 1, 00,000 then TDS under section 194D should be deducted at the rate of 5%.

(Republished with Amendments)

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2 Comments

  1. Yogesh R says:

    Section 5 of your article mentions,
    Any amount received by way of pension from JEEVAN SURAKSHA of LIC is exempted.
    Does it mean that the pension is to be treated as a TAX FREE income at the hands of recipient?

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