Insurance coverage Coverage Tax Advantages – Beneath New / Previous Tax Regime


What are the Well being, Life (Time period Life Insurance coverage, ULIPs, and Conventional Life Insurance coverage) insurance coverage coverage tax advantages below new and previous tax regimes after 1st April 2023? Allow us to talk about this side intimately.

Insurance Policy Tax Benefits

As you might bear in mind, efficient from 1st April 2023, there are particular adjustments have been carried out to the life insurance coverage premium taxation. This I’ve mentioned in my put up is expounded to finances 2023. You possibly can check with the identical in “Price range 2023 – 12 Key highlights impacting private finance“.

Contemplating all these adjustments, allow us to see the present insurance coverage coverage taxation guidelines below each new and previous tax regimes.

Insurance coverage Coverage Taxation – Beneath New / Previous Tax Regime

Allow us to begin with the reason of Medical insurance.

Well being Insurance coverage Coverage Tax Advantages – Beneath New / Previous Tax Regime

Well being Insurance coverage Coverage Tax Advantages – Beneath Previous Tax Regime

Medical insurance premiums paid for Self, Partner, or dependent kids are tax deductible as much as Rs.25,000 below Sec.80D. Nonetheless, if any one of many individuals talked about above (Self, Partner, or dependent kids) is a senior citizen and Mediclaim Insurance coverage premium is paid for such senior citizen then the deduction quantity might be Rs.50,000.

Identical means, the medical insurance premium paid to folks is eligible for deduction as much as Rs.25,000 below Sec.80D. Nonetheless, if any one in all your mother and father is a senior citizen (above 60 years of age), then the restrict is Rs.50,000.

For senior residents above the age of 60 years, who are usually not eligible to take medical insurance, the deduction is allowed for Rs 50,000 in direction of medical expenditure.

In case you are paying the premium towards medical insurance within the identify of the below-mentioned relations, then you’ll be able to avail of the Well being Insurance coverage Tax Advantages below Sec.80D.

  • Self
  • Partner
  • Your Mother and father (Dependent or not dependent)
  • Dependent kids

For senior residents above the age of 60 years, who are usually not eligible to take medical insurance, the deduction is allowed for Rs 50,000 in direction of medical expenditure.

Part 80D features a deduction of Rs.5,000 for any funds made in direction of preventive well being check-ups. This deduction might be throughout the total restrict of Rs.25,000/Rs.50,000, because the case could also be.

The entire abstract might be defined as beneath.

Health Insruance Tax Benefits under Old Tax Regime and New Tax Regime

Well being Insurance coverage Coverage Tax Advantages – Beneath New Tax Regime

As Part 80D just isn’t out there below the brand new tax regime, obliviously there are not any medical insurance coverage tax advantages.

Notice – The declare quantity acquired by medical insurance insurance policies whether or not paid on to the hospital (within the case of a cashless cowl) or reimbursed to the insured, just isn’t taxed as it isn’t an ‘earnings’ for you however reimbursement of an expense. 

Time period Insurance coverage Coverage Tax Advantages – Beneath New / Previous Tax Regime

Time period Insurance coverage Coverage Tax Advantages – Beneath Previous Tax Regime

They’re the only merchandise and straightforward to grasp additionally. The premium you pay in direction of the time period life insurance coverage is absolutely eligible for tax deduction below Sec.80C.

Notice that the combination quantity of deduction eligible below sections 80C, 80CCC, and 80CCD is capped at Rs.1,50,000 as per part 80CCE of the Revenue Tax Act, 1961.

If the coverage is terminated inside 2 years from the date of graduation of the coverage (within the case of a single premium coverage or in common premiums), then the deductions allowed in earlier years are reversed and added again to the yr’s earnings through which the coverage lapsed. 

Loss of life fee receivable by the nominee below the time period life insurance coverage is totally tax-free as per part 10(10D) of the Revenue Tax Act.

Time period Insurance coverage Coverage Tax Advantages – Beneath New Tax Regime

As Part 80C just isn’t a part of the brand new tax regime, the tax advantages are usually not out there below the brand new tax regime. Additionally, as ordinary, the demise advantages are tax-free below the brand new tax regime too.

ULIP Tax Advantages – Beneath New / Previous Tax Regime

ULIPs are essentially the most harmful merchandise which declare to mix funding with insurance coverage with excessive charges.

ULIP Tax Advantages below Previous Tax Regime

Premium funds below a ULIP are eligible for deduction below part 80C of the Revenue Tax Act. This covers the premium paid for particular person, partner, and kids with out specifying if dependent or not. As with time period insurance coverage premiums, ULIP premiums additionally fall below the Rs.1,50,000 restrict.

ULIP Tax Advantages below New Tax Regime

As ordinary, as Sec.80C just isn’t a part of the brand new tax regime, the tax advantages of investing in ULIP are usually not out there below the brand new tax regime.

ULIP Taxation at Maturity

Efficient from 1st February 2021, there have been sure adjustments in ULIP Taxation. Therefore, allow us to perceive the taxation of the insurance policies which have been bought earlier than 1st Feb 2021 and after 1st Feb 2021.

a) Taxation of ULIP Insurance policies bought earlier than 1st April 2021

If the coverage was issued earlier than 31.3.2012 and the premium just isn’t greater than 20% of the sum assured and if the coverage was issued after 1.4.2012 and the premium just isn’t greater than 10% of the sum assured, then the maturity proceeds are tax-free. In any other case, it’s taxable.

Nonetheless, the demise profit is tax-free

b) Taxation of ULIP Insurance policies bought after 1st April 2021

If the coverage was issued earlier than 31.3.2012 and the premium just isn’t greater than 20% of the sum assured, if the coverage was issued after 1.4.2012 and the premium just isn’t greater than 10% of the sum assured, AND if the combination premium doesn’t exceed Rs.2,50,000 for any of the earlier years throughout the time period of any of these insurance policies, then it’s tax-free. In any other case, it’s taxable.

ULIP fairness funds (The place ULIP invests at the least 65% in shares of home corporations) are taxed at 15% and 10% within the case of LTCG and STCG respectively (The place STT is paid). ULIP debt funds (of HIGH Premium ULIPs) shall be taxed like another capital asset. Such funds shall be taxed as debt mutual funds. Quick-term beneficial properties (holding interval <=3 years) shall be taxed on the marginal tax charge. Lengthy-term capital beneficial properties (holding interval > 3 years) shall be taxed at 20% after indexation.

Loss of life profit anyhow is tax-free (despite the fact that you aren’t assembly the above circumstances).

Do do not forget that as per part 80C(5)(ii), in case of a ULIP, if the coverage is terminated earlier than paying a premium for five years, then the good thing about 80C can be misplaced from that yr onwards and likewise, the previous deductions claimed would change into deemed earnings of the yr through which such termination takes place.

Life Insurance coverage Insurance policies Tax Advantages (excluding ULIPs) – Beneath New / Previous Tax Regime

Right here come the normal insurance policies like endowment, a reimbursement, assured merchandise, or any life insurance coverage merchandise which mix insurance coverage with funding (excluding ULIPs).

Life Insurance coverage Insurance policies Tax Advantages (excluding ULIPs) – Beneath Previous Tax Regime

Regardless of the premium you pay in direction of such insurance policies is eligible for the deduction below Sec.80C. Nonetheless, the deduction falls below the general cap of Rs.1,50,000 together with all of the gadgets below sections 80C, 80CCC, and 80 CCD.

If the coverage is terminated inside 2 years from the date of graduation of the coverage (within the case of a single premium coverage or in common premiums), then the deductions allowed in earlier years are reversed and added again to the yr’s earnings through which the coverage lapsed. 

Life Insurance coverage Insurance policies Tax Advantages (excluding ULIPs) – Beneath New Tax Regime

As Sec.80C just isn’t out there below the brand new tax regime to say, you’ll not get any tax advantages by investing in such insurance policies.

Life Insurance coverage Insurance policies Maturity Taxation

As per part 10(10D) of the Revenue Tax Act, your maturity proceeds are tax-free if –

  • The premium in any yr doesn’t exceed 20% of the sum assured for insurance policies issued between 1.4.2003 to 31.3.2012 and 10% of the sum assured for insurance policies issued after 1.4.2012.
  • 15% in case the coverage is on the lifetime of an individual with incapacity / extreme disabilities or specified illness or illnesses for insurance policies issued after 1.4.2013
  • The yearly mixture premium needs to be lower than Rs. 5 lakhs (efficient from 1st April 2023). For an previous coverage that was issued earlier than 1st April 2023, this Rs.5 lakh rule is not going to be relevant. 

These circumstances is not going to apply to the demise advantages. Loss of life advantages below conventional insurance policies might be tax-free.

Annuity Plans Tax Advantages Beneath New / Previous Tax Regime

These are pension plans the place both they’re instant annuity plans (you make investments a lump sum and the pension will begin instantly) or deferred annuity plans (you make investments frequently and after a sure interval, the pension will begin).

Annuity Plans (Pension Plans) Tax Advantages below Previous Tax Regime

Annuity plans come below the purview of sections 80C and 80CCC of the Revenue Tax Act 1961. This deduction is clubbed with all the opposite gadgets eligible for deduction below sections 80C and 80CCD with an mixture cap of Rs.1,50,000. 

The deduction is barely out there within the yr through which the contribution is made. 

Annuity Plans (Pension Plans) Tax Advantages below New Tax Regime

As ordinary, there are not any tax advantages below the brand new tax regime as Sec.80C just isn’t a part of the brand new tax regime.

The pension that you simply obtain from such annuity plans is taxed as per your tax slab.

I hope I’ve lined all of the facets of Insurance coverage Coverage Tax Advantages below new and previous tax regimes.

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