Income Tax Deduction: You are adopting a policy to reduce your income taxes; if not, you should be aware of this

 Income Tax Deduction: You are adopting a policy to reduce your income taxes; if not, you should be aware of this

Income Tax Deduction: You are adopting a policy to reduce your income taxes; if not, you should be aware of this

Income Tax Deduction: Proceed cautiously if you are purchasing a life insurance policy in order to avoid paying income taxes at the last minute. A little modification to the insurance regulations has resulted in the imposition of taxes on single premium plans.

Delhi, New. If you work for a firm, it's possible that HR has begun to want evidence of investment from you. Since there are still three months before the end of the fiscal year, the majority of individuals must have gotten the message from HR by now. Because of this, a lot of workers attempt to invest at the last minute in order to avoid taxes. This information is helpful to you if you are also participating in this kind of activity and would want to get an insurance coverage at the last minute to avoid paying taxes.

In actuality, there have been some changes to insurance policy regulations. If you are unaware of this, you may not have achieved your goal in buying the coverage. You won't be able to save tax on this, therefore you will have to spend a lot of money on it. Even though the current fiscal year ends on March 31st, businesses still need to submit their statistics by the end of February, which is why they are presenting the investment numbers to their staff via emails and other correspondence.

How much may be saved on taxes for insurance?

A taxpayer who purchases a life insurance policy is eligible for an annual reimbursement of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. This discount is further offered for single premium payments. This implies that you are eligible for a tax exemption on life insurance policies for which you have paid up to Rs 1.5 lakh within a fiscal year.

What regulations have been modified?

Any life insurance policy acquired after April 1, 2012, is eligible for a tax exemption upon payment of the single premium. However, there is a catch: your yearly premium cannot be more than 10% (or 15% in the case of a disability) of the policy's total insured value. You won't have to pay taxes when such an insurance matures if you abide by this regulation.

The amount of tax that will be assessed

According to insurance expert Manoj Jain, tax would need to be paid on the amount received at maturity if the yearly premium for a single premium life insurance policy exceeds 10% of the total insured. This sum may be really large. Under Section 194DA of the Income Tax, your insurance provider may deduct five percent of the maturity amount from your taxes. If you purchase an insurance for Rs 18 lakh with an annual premium of Rs 2 lakh, you would be required to pay 5% tax when the policy matures. Thus, in the event that you get Rs 20 lakh, including bonus, at maturity, you could be required to pay income tax on 5 percent of that amount, or Rs 1 lakh.