Filing of ITR: These tax benefits are available on life insurance policies

Filing of Income Tax Return: The deadline for filing ITR for assessment year 2022-23 is approaching. It should be noted that the government has no plans to extend the ITR filing deadline from July 31. Hence, it is important to ensure that you file your ITR on or before the due date to avoid penalties. To encourage savings and investment among taxpayers, the IT department provides various deductions from taxable income. A taxpayer is required to report his income from other sources in ITR. They also include investments in life insurance policies. However, if you are filing ITR, note these tax benefits on your insurance policies.

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

However, it should be noted that these life insurance policies were issued on or before March 31, 2012 and are only eligible for a deduction of up to 20%

of the actual sum assured or the premium actually paid, whichever is less. In case the insurance policy is issued on or after April 1, 2012, it will be eligible for deduction only up to 10% of the actual sum insured of the capital or the actual premium paid, whichever is less.

In case the life insurance policy is issued on or after 1st April 2013 on the life of a person with a disability as referred to in section 80U or suffering from a disease or infirmity as referred to in section 80DDB – then the premium paid will correspond to the terms of exemption from tax at the rate of 15% of the actual sum assured of the capital or the actual premium paid, whichever is less.

In addition, exemption from income tax is provided for maturity or death claims under life insurance policies under section 10(10D).

According to Clear, an income tax service provider, report when the premium paid under 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 bonus is fully exempt from total income tax under section 10(10D). Policies taken out after April 1, 2013, on the life of a person with a disability or disease referred to in sections 80U and 80DDB respectively, where the maturity amount received is tax-free, provided the premium paid does not exceed 15% of the sum assured are also covered here sum.

The report also highlights that taxation where the premium paid is more than 10% of the sum assured – all 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.

Further, the policyholder can claim his TDS on these life insurance policies by filing an ITR. If the policy holder receives more than 1 lakh amount under their insurance policies and they are not covered under section 10(10D), then TDS of 1% will be deducted by the insurer before making the payment to the policy holder. The same deduction applies to bonus payments. Further, if the sum received under the insurance policies is less than 1 lakh then no TDS will be deducted but the amount will be fully taxable.

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