ITR filing: These tax benefits are available on life insurance policies

ITR filing: These tax benefits are available on life insurance policies

Income Tax Return Filing: The due date for filing ITR for the assessment year 2022-23 is nearing. Notably, the government is not planning to extend the ITR filing deadline from July 31. Thereby, it is important to ensure, that you file your ITR on or before the timeline to avoid penalties. To encourage savings and investments amongst taxpayers the IT department provides various deductions from the taxable income. A taxpayer is needed to intimate about their income from other sources in the ITR. These also include investments under life insurance policies. That said, if you are filing for ITR, take note of these tax benefits under your insurance policies.

Section 80C is one of the most popular sections available in the income tax. If a policyholder has paid a premium on life insurance to insure his or her life or on the life of the spouse or any child of the assessee and in the case of HUF, then such premiums paid are eligible for benefit under section 80C.

However, it needs to be noted that, these life insurance policies are issued on or before the 31st day of March 2012, and they shall be eligible for deduction only to the extent of 20%

of the actual capital sum assured or actual premium paid whichever is less. In case, if the insurance policy is 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.

In case, if the life insurance policy is issued on or after April 1, 2013, on the life of a person with a disability as referred to in section 80U, or suffering from disease or ailment as specified under section 80DDB - then the premium paid will be eligible for tax exemption to the extent of 15% of the actual capital sum assured or actual premium paid whichever is less.

Further, income tax exemption is given on maturity or death claims under life insurance policies under section Section 10(10D).

According to Clear, an income tax services provider, report, when the premium paid on the policy does not exceed 10% of the sum assured for policies issued after 1 April 2012 and 20% of the sum assured for policies issued before 1 April 2012– any amount received on maturity of a life insurance policy or amount received as a bonus is fully exempt from Income Tax under Section 10(10D). Also covered here are policies taken after 1 April 2013, on the life of a person with a disability or a disease specified under Sections 80U and 80DDB respectively, where the amount received on maturity is tax-free provided the premium paid does not exceed 15% of the sum assured.

The report also highlighted that taxation, where the premium paid, is more than 10% of the sum assured – any money received from a life insurance policy, where the premium is more than 10% or 20% of the sum assured as the case may be, is fully taxable.

Also, a policyholder can claim their TDS on these life insurance policies by filing ITR. If a policyholder receives more than ₹1 lakh amount on their insurance policies and these are not covered under Section 10(10D), then a TDS of 1% will be deducted by the insurer before making the payment to the policyholder. The same deduction is applicable to bonus payments. Further, if the amount received on the insurance policies is less than ₹1 lakh, then no TDS will be deducted however the amount will be fully taxable.