Home Loan Principal Repayment
If you purchase a property still under construction and make your EMI payments, you may deduct the interest on your housing loan when the project is finished. According to the Income Tax Act, interest from pre-and post-construction periods may be deducted.
If a loan is taken out jointly, each borrower may deduct the interest paid on loan up to a maximum of 2 lakh under Section 24 and the principal repayment up to a maximum of 1.5 lakh under Section 80C. Compared to a house loan taken out by a single applicant, this doubles the number of available deductions. However, both applicants must fulfil their EMI obligations and are co-owners of the home.
There Are Unrelated People Involved In The Policy
Do you have to pay taxes on life insurance when it comes to unrelated people involved in the policy? Most of the time, individuals are buying a life insurance policy on themselves with the intent of providing for their named beneficiaries. In some circumstances, a policy may be sold or transferred, after the initial purchase, to a non-related third party. In this case, the new owner would most likely name a new beneficiary, themselves, or some other party, not related to the insured. Upon the death of the insured, instead of the death benefit passing to the beneficiary tax-free, the beneficiary would owe income taxes on any benefit amount exceeding the original purchase price + premiums paid by the unrelated party.
NOTE: Corporate key employees, partners, and business associates are considered related for the purpose of life insurance.
Tds For Life Insurance Policies
According to IRDAI, if the sum received from the insurance policy exceeds Rs 1, 00,000, the insurer will deduct Tax Deducted at Source of 1% before paying you. This TDS deduction also applies to any bonus amount you receive from the policy. If the sum received is less than Rs 1, 00,000, no TDS deductions are made. However, you can claim credit for this TDS deduction when you file your Income Tax returns.
Wrapping Up
Choosing the right tax saving insurance plan not only provides you with an immensely beneficial life cover, but also helps you reduce your overall tax burdens. Read the tax benefits offered by various term plans while shopping for the right Life Insurance policy.
DISCLAIMER
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How Much Key Man Life Insurance Coverage Do You Need
If youre borrowing money, the lender may require a certain amount of key man coverage. Otherwise, the amount of coverage you need will vary according to your business and the employee you’re insuring. In principle, try to purchase sufficient key man insurance that the impact of losing the insured employee is near zero. To accomplish this, you’ll want to account for the revenue and profit attributable to the employee, the companys cost structure, the cost to replace the employee, and any “soft” value the employee brings to the company.
Depending on who you want to insure, the calculation for how much key person coverage you need will change significantly. For example, its fairly simple to determine how much revenue is attributable to a top salesperson. However, the value is less tangible for a well-known CEO whom many employees joined the company to work with.
While none are comprehensive, a few commonly used methods for estimating the necessary amount of key executive life insurance are:
Estate And Inheritance Taxes
One poor decision that investors seem to frequently make is to name “payable to my estate” as the beneficiary of a contractual agreement, such as an individual retirement account , an annuity, or a life insurance policy. However, when you name the estate as your beneficiary, you take away the contractual advantage of naming a real person and subject the financial product to the probate process. Leaving items to your estate also increases the estate’s value, and it could subject your heirs to exceptionally high estate taxes.
Section 2042 of the Internal Revenue Code states that the value of life insurance proceeds insuring your life is included in your gross estate if the proceeds are payable:
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Maximize Income Tax Benefits With The Right Life Insurance Plans
A life insurance policy not only safeguards your loved ones financially against unforeseen events but also gives tax benefits. Claiming the maximum life insurance tax benefits is both simple and hassle-free. All you need to do is to understand which types of life insurance policy qualifies for the tax benefits, the maximum amount you can save, when and how to claim benefits.
Life Insurance Benefits You Cannot Ignore
Life insurance plans provide risk-coverage as monetary compensation to your family against the premiums paid during your lifetime. You also have the option to customise your insurance plan by choosing from different types of policies like term insurance, ULIPs, endowment plans, etc. Some life insurance plans also allow you to avail loan benefits against a portion of the sum insured.
Also, check out the tax benefits of investing in Health Insurance Plans.
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The Whole Is Greater Than The Sum Of Its Parts
The various tax benefits afforded by whole life insurance are powerful on their own, but when combined into one neat package, the synergies become quite attractive. Sure you can find one or two of the many tax benefits whole life insurance has to offer among other financial vehicles, but you cannot find all of them together in any other financial product available.
Is Life Insurance Really Useful
A basic life insurance policy is constructed to provide immediate liquid cash paid over a period of time to the family or the nominee of the insured after his/her death. It serves as major financial support as they are exempted from paying taxes for the amount acquired. Whereas, if the insured lacks dependent beneficiaries or a sustained income, it could be a waste of money.
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Conditions For Tax Exemption Under Section 10 For Term Insurance Policy
- The premium payable for the policies bought between the period of 1st April 2003 and 31st March 2012 should not be more than 20% of the sum assured.
- For every policy that is purchased after 1st April 2012, the amount paid periodically to the insurer should not be more than 10% o the sum assured. In other words, the actual capital sum assured must be at least ten times the amount being paid as a premium.
- The premium payable for any year during the term of policy should not exceed 20% of the capital sum assured.
- The premium payable for a definite number of years crosses 15% of the assured sum of capital under two conditions:
- If the policy is taken for an individual with some time acute disability as per Section 80U.
- As per the conditions listed on Section 8DDB, if the policy is taken for an individual with a disorder or suffering from an ailment.
- Tax Deducted at Source of 1% is applied when the compensation amount received on policies that do not come under Section 10 exceeds rupees 1,00,000 by the company before making the payment. The PAN of the policyholder is also made available to the insurer.
Eligibility And Conditions For Tax Exemption Under Section 80c For Term Insurance Policy
- Tax exemption under this Section is only eligible for individual taxpayers and Hindu Undivided Family . This implies that corporate companies, partnership firms, and other business entities are not qualified to avail an exemption.
- Section 80C has multiple subsections like 80CCC, 80CCD , 80CCD , 80CCD2. These give the investor a comprehensive idea of which should be opted by them.
- Investments in the Equity Linked Savings Scheme are also eligible for tax deductions under Section 80C. This savings scheme has the least holding period of just three years.
- Tax benefits for the contributions made to the taxpayers own Public Provident Fund or the individuals spouse or children are also eligible.
- Educational expenses for not more than two children in India are permitted for tax benefits.
- For the repayment of home loan amount only borrowed from particular entities like banks and housing finance companies.
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I Have Filed My Income Tax Return What Should I Do If I Have Forgotten To Claim Or Need To Amend My Claim For Life Insurance Relief
1. If you e-Filed your Income Tax Return
Please re-file within 7 days of your previous submission or by 18 Apr, whichever is earlier. You will only be able to re-file once. When you re-file, you must include all your income details, expenses, donations and relief claims, where applicable. Once you have re-filed successfully, your new submission will override the previous submission.
2. If you filed a paper Income Tax Return or are unable to re-file online
a. your request to claim or revise the relief
b. the amount of relief that you wish to claim or revise
c. the amount of insurance premium paid in the previous year
d. the amount of insured value of the policy
e. the name of the insurance company
f. the name of the insured person and
g. your confirmation that you have met the qualifying conditions.
Please file an amendment using the Object to Assessment digital service at myTax Portal within 30 days from the date of your tax bill.
If you are unable to use the digital service, you may email us:
You may also email us your request to withdraw your relief claim.
Eligible Deductions Under Section 80c
Taxpayers spend a large amount of time and effort every fiscal year researching and finding strategies to invest in order to save money on taxes. The planning and research phase can be quite intimidating given the complexities of these different schemes and financial jargon.
If you are someone who finds themselves financiallychallenged but still wants to save tax, this article can help you in making the right decision.
You can be worry-free if you are a salaried employee, since you can get good tax benefits under Section 80C. From Public Provident Fund to ELSS and Life Insurance premiums, you can get up to INR 1,50,000 tax deduction every year.
Tax-saving schemes and initiatives that can provide individuals or HUFs with tax benefits are included in the Section 80C deduction list. Before delving into the 80C deduction list, its a good idea to familiarise yourself with various tax deductions. Section 80C deduction list can be classified into two categories:
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Using Life Insurance Trusts To Avoid Taxation
A second way to remove life insurance proceeds from your taxable estate is to create an irrevocable life insurance trust . To complete an ownership transfer, you cannot be the trustee of the trust, and you may not retain any rights to revoke the trust. In this case, the policy is held in trust, and you will no longer be considered the owner. Therefore, the proceeds are not included as part of your estate.
Why choose trust ownership rather than transferring ownership to another person? One reason might be that you still wish to maintain some legal control over the policy. Or perhaps you are afraid that an individual owner may fail to pay premiums, whereas in the trust, you can ensure that all premiums are paid promptly. If the beneficiaries of the proceeds are minor children from a previous marriage, an ILIT will allow you to name a trusted family member as trustee to handle the money for the children under the terms of the trust document.
What Is Whole Life Insurance
In simple terms, life insurance provides a payment of money to your loved ones if you pass away. While there are multiple types of life insurance, whole life is a form of permanent life insurance that comes with many features. Whole life insurance benefits you for your entire life, as long as you keep your payments up to date. It also has a cash value component that is money you can use during your lifetime.
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Tax Benefits On Life Insurance
Life insurance policies are an extremely useful way of ensuring your familys financial security after your demise. This is the foremost reason one takes up a life insurance policy but it has other benefits too. Life insurance policies are an extremely effective tax planning tool. They can help you save up a lot on taxes. Tax benefits on life insurance can be availed by policyholders under the Income Tax Act 1961.
There are two types of tax benefits available on life insurance policies, Deductions, and exemptions. Lets understand them in detail.
Is There An Eligibility Criterion To Receive Tax Benefits Of Term Insurance
Tax benefits of term insurance plans have the following eligibility criteria
- Individual taxpayers and Hindu Undivided Families are eligible for the deduction
- Non-Resident Indians can also claim tax deductions and exemptions
- The premium can be paid for self, spouse and dependent children
- The deduction or exemption is allowed only in the financial year when you pay the due premium or when you receive the policy benefits
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Cost Of Key Man Life Insurance
The cost of key man life insurance depends on:
- Type of policy purchased: Term life insurance policies are less expensive than permanent insurance, as they offer coverage for a fixed period of time and dont accumulate a cash value. The several different types of permanent life insurance policy each of can have different costs, risks and benefits.
- Policy death benefit: The greater the amount of coverage, the higher premiums will be.
- Employees health and lifestyle: An employees age, medical history, hobbies, occupation, family history, driving history, and general health determine their level of risk, which in turn will affect the premium.
Its important to note that if youre trying to insure an older or less healthy employee, the cost of key man life insurance can be incredibly high. Alternatively, you may not be able to find coverage at all. If this is the case, you may have to look to other options, such as a loan, to provide compensation if your key employee should pass away. And you may want to prepare early for such a calamity, by creating a succession plan or beginning a search for viable replacement candidates.
Editorial Note: The content of this article is based on the authors opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
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Tax Refund In Terms Of Insurance
If the premium paid for the policy exceeds 10% of the sum assured, the maturity benefit becomes taxable. Moreover, if the maturity benefit is more than Rs.1 lakh, a TDS of 5% is also deducted by the insurance company if PAN is provided to Company. In the absence of PAN, TDS rate will be 20%. Note that TDS is deducted on gain from policy only.
However, if your taxable income is below the taxable limit , you can claim a refund of the TDS that has been deducted from the maturity proceeds.
For instance, if the maturity benefit is Rs.5 lakhs and premium paid is Rs.3 lakhs, a TDS of 5% of Rs. 10,000 will be deducted on gain from policy , would be deducted. However, if the maturity benefit is your only income during the financial year, you are not liable to pay tax since the amount is below the threshold limit of Rs.2.5 lakhs. In such cases, you can file for a tax refund on the TDS deducted from the maturity benefit.
When Are Life Insurance Premiums Tax
Life insurance premiums are not usually tax-deductible. You may, however, be able to deduct them as a business expense if you are a business owner who has purchased life insurance coverage for key employees or as part of a buy-sell agreement. Also, if you were divorced prior to 2019 and have a court-ordered life insurance policy, these premiums may also be deductible.
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How To File Itr
Income tax returns³ have to be filed by person whose annual income exceedsminimum amount not subject to tax. Companies and firms have to file their income tax return³ without fail and regardless of profits or losses incurred. Filing an income tax return³ is also necessary even if you have no tax to pay but need to claim your tax refund for taxes deducted at source.
So how do you file your Income Tax Return³. You need to first create your computation of Income Tax. You have to file your Income tax return³ online or by using Tax utilities. The correct form as applicable should be use for filing returns.
All details have to be filled out in all the requisite columns of the forms. Be sure that all the fields are filled out carefully. At the time of online filling, TDS section will get auto populated and you will have to verify that it is correct.
Thereafter in case of online filing of ITR – you should check all details and if there is any tax payable immediately pay the same and enter the details of tax paid. Your tax liability should show as nil. Upload the digital signature if needed. And as a last step e verify your return filed.