Usually, tax advantages on life insurance coverage premium is accessible below part 80C of the Earnings Tax Act. Nevertheless, the annual restrict of tax profit u/s 80C at the moment is Rs 1.5 lakh and aside from life insurance coverage premium, the part comprises many different investments/bills that comprises fee of tuition payment for schooling of as much as two youngsters, compensation of house mortgage principal, contribution to PF (worker’s contribution), ULIP, PPF and Sukanya Samriddhi Yojana Account, investments in ELSS, NSC, FD for five years or extra, and so forth.
Because of the presence of so many elements, the annual 80C limt of Rs 1.5 lakh will get exhausted rapidly and taxpayers couldn’t get advantages on many different tax-saving investments.
Nevertheless, resulting from restrictions in motion amid the Covid-19 pandemic this yr (FY 2020-21), the federal government has declared the LTC Scheme in lieu of the Depart Journey Concession that enables the salaried beneficiaries to assert tax advantages on bills made between October 12, 2020 to March 31, 2021 on buy of fine and availing providers that entice GST charge of 12 per cent or extra as an alternative of journey bills.
Profit on Life Insurance coverage
Among the many providers, life insurance coverage can be included within the LTC Scheme. Nevertheless, in case the profit is already claimed on premium fee u/s 80C, it could’t be claimed below the LTC Scheme. So, in case your 80C restrict is exhausted, you should still declare advantages below the LTC Scheme. In any other case, you must select whether or not you wish to declare the profit u/s 80C or below the LTC Scheme.
Situations for Claiming Profit
Furthermore, the profit below the LTC Scheme shall be allowed on premium paid for brand new insurance policies issued between October 12, 2020 to March 31, 2021 solely and never on renewal premium. So, to avail the profit, you must buy a brand new life insurance coverage coverage – be it a time period plan or a ULIP or an annuity or an endowment plan.
Quantity of Profit
If you are going to buy a single premium plan throughout the eligibility interval, you’d get tax profit on all the premium or your most LTC profit quantity, whichever is decrease. However for normal premium insurance policies issued in that interval, you’ll get advantages on the quantity of premium paid until March 31, 2021, offered the combination quantity is inside your LTC restrict.
The next desk reveals the quantity that shall be thought of for calculation of LTC for various classes of insurance policies: