Explanation of tax benefits

Explanation of Tax Benefits
Deduction under Section 80C
A. Premiums paid for Life insurance
Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.
1. Eligible Savings: Premiums paid or deposited in the financial year by assessee to effect or to keep in force insurance on the life of following persons:-In case of individual assessee - Self, spouse and children.- In case of HUF assessee - any member
2. 20% limit: If the amount of premium paid in a financial year for a policy is in excess of 20% of the actual capital sum assured, then deduction will be allowed only for premiums upto 20% of the sum assured.
3. If insurance contract is terminated within 2 years in case of single premium insurance policy or in other cases premium is not paid for 2 years, tax deduction allowed earlier would become taxable as income.
B. Premium paid for Pension Plans
1. Premium paid during financial year for deferred Pension Plan or notified Pension Plan is also eligible for tax deduction under Section 80C.
2. Premium can be paid for deferred Annuity Plan on the life of Self, spouse and children
C. Limit on amount of deduction: Deduction under Section 80C is available maximum upto Rs. 100,000 for aggregate payments/ deposits specified under Section 80C (including life insurance premiums & pension policy premiums). If any investments have been made under Section 80CCC and 80CCD, then the qualifying amount under Section 80C will stand reduced to that extent.
Premiums paid for Pension plans - Section 80CCC
1. Permitted Deduction: Section 80CCC allows to individual, tax deduction for amount paid during the financial year out of income chargeable to tax, towards specified Pension Plan. Maximum deduction allowed is Rs.100,000.
2. Receipt under Policy: Amounts received on surrender (whole/part) of annuity plan, (including accrued interest/ bonus) and amounts received as Pension are taxable as income in the year of receipt.
Premiums paid for medical insurance - Section 80D
1. Category of assesses allowed deduction : Individual assessee and Hindu Undivided Family assessee.
2. Eligible premiums: Premiums paid by assessee by any mode other than cash in financial year out of his taxable income to effect or to keep in force an insurance on the health of following persons:
- In case of individual assessee - Self, spouse, dependant children and dependant parents.- In case of HUF assessee - any member of HUF
3. Deduction and upper limit: The qualifying amounts under Section 80D is upto Rs 15,000/-. However, a higher amount of upto Rs 20,000/- is permitted if the person, for whose health insurance the premium was paid, was resident and aged 65 years or more at any time during the financial year in which the premium was paid. Such amounts of premium paid would be allowed as deduction from the total income of the assessee.
Overall deduction limit - Section 80CCE
As per Section 80CCE, the maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC and 80CCD will be limited to Rs 100,000.
Benefits under insurance policy - Section 10(10D)
As per Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax. However, this rule does not apply to following amounts:
- sum received under Section 80DD(3), or
- any sum received under a Keyman Insurance Policy, or
- any sum received other than as death benefit under an insurance policy which has been issued on or after April 1 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the sum assured.
Rebate in respect of Securities Transaction Tax (STT) paid
1. Section 88E has been introduced by Finance Act (No 2) of 2004.
2. As per the provisions, where total income of an assessee includes any income under the head 'Profits and Gains from Business or Profession' arising from taxable securities transactions, he shall be entitled to a rebate from the income tax on such income.
3. Amount of rebate : Amount of STT paid in respect of taxable securities transactions entered into in the course of business during that previous year.
4. The deduction will be allowed if proof of payment of STT is furnished alongwith the return. The proof has to be furnished as per the format prescribed by Income Tax.
5. Maximum deduction shall be equal to the amount of income tax on above income.