Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Investment Planning for Tax Savings

Table of Contents

1.   Investment in Sukanya Samriddhi Yojana (SSY)

The Sukanya Samriddhi Yojana interest rate for January to March 2020 (Q4, FY 2019-20), is  8.5%. The interest rate on the Sukanya Samriddhi Yojana is fixed by the government and reviewed  every quarter.

(A)   Eligibility for Sukanya Samriddhi Yojana  (SSY) Account

The following are the key eligibility criteria for opening a SSY Account as part of the Beti  Bachao, Beti Padhao Yojana:

  • Sukanya Samriddhi account can be opened only in the name of girl child by her parents or legal guardians.
  • The girl child has to be below the age of 10 at the time of account opening.
  • Multiple Sukanya Samridhhi accounts cannot be opened for a single girl child.
  • Only two SSY accounts are allowed for a family i.e. one for each girl child.
Investment Planning for Tax Savings
Investment Planning for Tax Savings

(B)   How to invest in the Sukanya Samriddhi Yojana (SSY)

You can invest in this scheme though your nearby post office or designated branches of  participating public and private banks. You will need to submit KYC documents like  Passport, Aadhaar Card, etc. along with the required form and initial deposit by cheque/draft. This  wide reach is designed to help ensure success of the Beti Bachao, Beti Padhao Yojana.

(C)   Benefits of Investing in Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana introduced as part of the Beti Bachao, Beti Padhao Yojana initiative,  provides investors with a range of benefits. Some of the key benefits of this scheme for benefit of girl  child are as follows:

  • Provides tax deduction benefits under Section 80C up to ₹ 1.5 lakh annually
  • Flexible investment option with minimum deposit of ₹ 250 in a year (max. ₹ 1.5 lakh per annum)
  • Guaranteed returns instrument backed by the Government of India (sovereign guarantee)
  • Higher fixed rate of return (currently 8.4% per annum for Q4 FY 2019-20) as compared to other government-backed tax saving schemes such as PPF.
  • Long term investment hence provides the benefit of compounding.
  • Can be freely transferred from one part of the country to another (bank/post office) in case of transfer of parent/guardian operating the Sukanya Samriddhi Account.

(D)   Minimum and Maximum Amount for SSY Account

The minimum annual contribution to the Sukanya Samriddhi Account is ₹250 and the maximum  of ₹1.50 lakh in a financial year. You have to invest at least the minimum amount every year for up  to 15 years from the date of account opening. Thereafter the account will continue to earn interest till  maturity.

(E)   Tenure of Sukanya Samriddhi Yojana (SSY) Account

Sukanya Samriddhi Yojana has a tenure equal to the time the girl child is 21 years of age or upon  her marriage attaining the age of majority (18 years). However contributions only need to be made for  15 years. Thereafter the account continues to earn interest until maturity even if no deposits are made  into it.

(F)   Tax Rules of Sukanya Samriddhi Yojana (SSY)

From a taxation perspective, SSY investments are designated as an EEE (Exempt, Exempt,  Exempt) investment. This means that the principal invested, the interest earned as well as the maturity  amount are tax free. Under existing taxation rules of Sukanya Samriddhi Yojana, the tax deduction  benefit on the principal amount invested is up to ₹1.5 lakh per annum under Section 80C of the  Income Tax Act, 1961.

(G)   Partial Withdrawal  from Sukanya Samriddhi Yojana (SSY)

The girl can also avail partial withdrawal facility (not more than 50% of the balance) after  attaining the age of 18 years for higher education expenses.

(H)   Premature closure of Sukanya Samriddhi Yojana (SSY) Account

Premature closure can only be done by a girl child on attaining the age of 18 years for the purpose  of marriage expenses.

(I)    Loan on Sukanya Samriddhi Yojana (SSY) Account

Under existing rules, there is no option of availing a loan on the basis of the balance available in a  Sukanya Samriddhi Account. This benefit is currently available in case of another government tax  saving scheme – Public Provident Fund (PPF) account which offers the benefit of loan against PPF  account from the third year of subscription onwards.

(J)    Transfer of Sukanya Samriddhi Yojana (SSY) Account

One of the key benefits of the Sukanya Samriddhi Yojana Account is the fact that it is easily  transferable from one part of India to another. Under existing rules, you can transfer this tax saving  deposit account for benefit of girl child from one India Post Office to another or from one designated  bank branch to another with ease.

To initiate transfer of your SSY account from a post office, you will have to fill out and submit  the Sukanya Samriddhi Account Transfer Request Form with the Post Master of the India Post Office  where your account is currently located. Similar transfer forms are available online as well as offline  in case you want to transfer the Sukanya deposit from one designated bank branch to another.

2.   Investment in Post Office Savings Account

  • A post office savings account requires a minimum balance of ₹500 to open the account.
  • The cash can be withdrawn either partly or completely if need be.
  • The risk exposure is very less to the account holders because they can avail an assured return on all the investments.
  • The account can be transferred from one post office to another.
  • Core banking post offices also provide the facility of ATM/Debit cards.
  • An account can be opened in the name of minor who is below the age of 10 years. It will be managed and operated by the parent or guardian.
  • An account holder can nominate a person to whom the funds will be provided in case of any demise to the account holder.
  • Post office savings account does not have any maturity period. Hence, the account opening process is hassle-free and quick.
  • An individual account can be converted into joint account and vice-versa.
  • Every person residing in a rural area can open a savings account.
  • An adult can open a post offices savings account.
  • The adult must be an Indian.
  • In case a minor needs to open a post office savings account, he/she should be at least 10 years old.
  • A guardian can also open an account on behalf of the minor.
  • Two or three persons can open a joint post office savings account.
  • A person who is not of sound mind can also open a post office savings account.
  • The central government decides the interest rates on the post office savings account. Mostly it is same as that of the banks which is around 4% and it is calculated every month.
  • According to the income tax regulations, if a post office savings account holder generates returns lower than ₹10,000 a year through interest, then it is tax-free
  • The money deposited in a post office savings account can be withdrawn any time when the depositor needs. Only thing is a minimum balance of ₹50 should be maintained in case of a  generic account and ₹500 in case of cheque facility.

3.   Investment in Post Office Recurring Deposit

  • A Recurring Deposit offers a host of benefits to individuals, helping them save up for a rainy day. Ease of use and flexibility have made it a popular savings tool, with both banks and post  offices offering RDs. Most individuals who opt for Post Office Recurring Deposits belong to  rural or semi-urban areas, where post offices are the preferred instrument compared to banks.  One reason for their popularity among the masses is the high interest rate one earns on them,  providing a healthy profit on maturity.
  • The interest rates are revised periodically, with a Post Office RD currently earning an interest of 7.2% per annum. The interest is compounded every quarter, which ensures that a sum of  money multiplies by the time it matures.
  • A Recurring Deposit is an instrument which is used as a medium-term investment option. Most investors opt for it in order to meet foreseeable emergencies in the coming years.  Currently, individuals who wish to open a Post Office RD need to ensure that their deposits  are active for a minimum period of 5 years.
  • Individuals who wish to continue with their RD even after this period can do so, for there is a provision which permits an RD to be extended by 5 more years, taking the maximum tenure  to 10 years. RDs which have been extended beyond 5 years will continue to earn the interest,  which is compounded every quarter, as previously.
  • A Recurring Deposit provides individuals an opportunity to save for the future by using the resources available to them. Unlike other deposits, the minimum deposit amount is kept low,  ensuring that millions of rural and lower-middle class Indians can afford it. The table below  highlights the quantum of deposits permitted in an RD.
See also  ‘Residential Status’ under Income Tax Act. 1956
Minimum Deposit ₹100 per month
Maximum Deposit No upper limit
  • An individual opening a Post Office RD is expected to make a total of 60 deposits during the  period, i.e. one deposit every month for 5 years. The first deposit should be made when the account is opened, with subsequent monthly deposits to be made before a particular date,  depending on the date on which the account was opened.
  • Individuals who open an account between the 1st and 15th of a particular month are expected to make monthly deposits before the 15th of the next month. Accounts which were opened  after the 15th of a month will require subsequent deposits to be made between the 16th and  the last day of a particular month. Deposits can be made either by means of a Demand Draft,  a Pay Order or a Cheque.
  • Post Office Recurring Deposit Interest Rates
Number of Advance Deposits Quantum of Rebate 
More than 5,  lesser than 11 1 rupee for every ₹10 deposited
  More than 11 ₹4 for every ₹10 deposited – for 12 deposits

₹1 for every ₹10 deposited after 12 deposits

Note that these advance deposits should be made in a particular month. 

4.   Investment in 5-Year Post Office Recurring Deposit Account (RD)

  • Account can be opened by cash/Cheque and in case of Cheque the date of deposit shall be date of presentation of Cheque
  • Nomination facility is available at the time of opening and also after opening of account
  • Account can be transferred from one post office to another
  • Any number of accounts can be opened in any post office
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account
  • Joint account can be opened by two adults
  • Subsequent deposit can be made up to 15th day of next month if account is opened up to 15th of a calendar month and up to last working day of next month if account is opened between  16th day and last working day of a calendar month.
  • If subsequent deposit is not made up to the prescribed day, a default fee is charged for each default, default fee @ 0.05 rs for every 5 rupee shall be charged. After 4 regular defaults, the  account becomes discontinued and can be revived in two months but if the same is not  revived within this period, no further deposit can be made.
  • *If in any RD account, there is monthly default amount, the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit. This will  be applicable for both CBS and non CBS Post offices.
  • There is rebate on advance deposit of at least 6 installments o Single account can be converted into Joint and Vice Versa  o Minor after attaining majority has to apply for conversion of the account in his name
  • One withdrawal up to 50% of the balance allowed after one year. It may be repaid in one lumpsum along with interest at the prescribed rate at any time during the currency of the  account  o Full maturity value allowed on R.D. Accounts restricted to that of INR. 50 denomination in  case of death of depositor subject to fulfillment of certain conditions.
  • In case of deposits made in RD accounts by Cheque, date of credit of Cheque into Government accounts shall be treated as date of deposit.
  • From 01.0 1.2020, interest rates are as follows:
  • 2% per annum (quarterly compounded)
  • On maturity INR 10 account fetches INR 725.05. Can be continued for another 5 years on year to year basis
  • Minimum Amount for opening of account is ₹ 100 per month or any amount in multiples of ₹10. No maximum limit.

5. Investment in  Post Office Time Deposit Account (TD)

>>           Account may be opened by individual

>>           Account can be opened by cash/Cheque and in case of Cheque the date of realization of Cheque in Govt. account shall be date of opening of account

>>           Nomination facility is available at the time of opening and also after opening of account  o Account can be transferred from one post office to another

>>           Any number of accounts can be opened in any post office

>>           Account can be opened in the name of minor and a minor of 10 years and above age can open  and operate the account

>>           Joint account can be opened by two adults.

>>           Single account can be converted into Joint and Vice Versa

>>           Minor after attaining majority has to apply for conversion of the account in his name

>>           In CBS Post offices, when any TD account is matured, the same TD account will be  automatically renewed for the period for which the account was initially opened. Example 2  Years TD account will be automatically renewed for 2 Years. Interest rate applicable on the  day of maturity will be applied

>>           The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax  Act, 1961 from 1.4.2007.

>>           Minimum Amount for opening of account is Minimum ₹1000 and in multiple thereof. No  maximum limit.

>>           Interest payable annually but calculated quarterly. Interest rates from 01.07.2019

Period Rate
1yr.A/c 6.9%
2yr.A/c 6.9%
3yr.A/c 6.9%
5yr.A/c 7.7%

6.   Investment in Post Office Monthly Income Scheme Account (MIS)

>>           Account may be opened by individual.

>>           Account can be opened by cash/Cheque and in case of Cheque the date of realization of  Cheque in Govt. account shall be date of opening of account.

>>           Nomination facility is available at the time of opening and also after opening of account.

>>           Account can be transferred from one post office to another.

>>           Any number of accounts can be opened in any post office subject to maximum investment  limit by adding balance in all accounts.

>>           Account can be opened in the name of minor and a minor of 10 years and above age can open  and operate the account.

>>           Joint account can be opened by two or three adults.

>>           All joint account holders have equal share in each joint account.

>>           Single account can be converted into Joint and Vice Versa.

>>           Minor after attaining majority has to apply for conversion of the account in his name.

>>           Maturity period is 5 years from 1.12.2011.

>>           Interest can be drawn through auto credit into savings account standing at same post office,  through PDCs or ECS/In case of MIS accounts standing at CBS Post offices, monthly interest  can be credited into savings account standing at any CBS Post offices.

>>           Can be prematurely en-cashed after one year but before 3 years at the discount of 2% of the  deposit and after 3 years at the discount of 1% of the deposit. (Discount means deduction  from the deposit.)

>>           A bonus of 5% on principal amount is admissible on maturity in respect of MIS accounts  opened on or after 8.12.07 and up to 30.11.2011. No bonus is payable on the deposits made  on or after 1.12.2011.

>>           From 01.07.2019, interest rate is 7.6% per annum payable monthly.

>>           Minimum Amount for opening of account is in multiples of ₹ 1000

>>           Maximum investment limit is INR 4.5 lakh in single account and ₹ 9 lakh in joint account

>>           An individual can invest maximum ₹4.5 lakh in MIS (including his share in joint accounts)

>>           For calculation of share of an individual in joint account, each joint holder have equal share  in each joint account.

7.   Investment in Senior Citizen Savings Scheme (SCSS)

>>           An individual of the Age of 60 years or more may open the account.

>>           An individual of the age of 55 years or more but less than 60 years who has retired on  superannuation or under VRS can also open account subject to the condition that the account  is opened within one month of receipt of retirement benefits and amount should not exceed  the amount of retirement benefits.

>>           Maturity period is 5 years.

>>           A depositor may operate more than one account in individual capacity or jointly with spouse  (husband/wife).

>>           Account can be opened by cash for the amount below INR 1 lakh and for INR 1 Lakh and  above by Cheque only.

>>           In case of Cheque, the date of realization of Cheque in Govt. account shall be date of opening  of account.

>>           Nomination facility is available at the time of opening and also after opening of account.

>>           Account can be transferred from one post office to another

>>           Any number of accounts can be opened in any post office subject to maximum investment  limit by adding balance in all accounts.

>>           Joint account can be opened with spouse only and first depositor in Joint account is the  investor.

>>           Interest can be drawn through auto credit into savings account standing at same post office,  through PDCs or Money Order.

>>           In case of SCSS accounts, quarterly interest shall be payable on 1st working day of April,  July, October and January. It will be applicable at all CBS Post Offices.

>>           Quarterly interest of SCSS accounts standing at CBS Post offices can be credited in any  savings account standing at any other CBS post offices.

>>           Premature closure is allowed after one year on deduction of an amount equal to1.5% of the  deposit & after 2 years 1% of the deposit.

>>           After maturity, the account can be extended for further three years within one year of the  maturity by giving application in prescribed format. In such cases, account can be closed at  any time after expiry of one year of extension without any deduction.

>>           TDS is deducted at source on interest if the interest amount is more than INR 10,000 p.a.

>>           Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act,  1961 from 1.4.2007.

>>           From 01.07.2019, interest rates are 8.6% per annum, payable from the date of deposit of 31st  March/30th Sept/31st December in the first instance & thereafter, interest shall be payable on  31st March, 30th June, 30th Sept and 31st December.

>>           Minimum Amount for opening of account shall be only one deposit in the account in multiple  of INR.1000. Maximum not exceeding INR 15 lakh.

8.   Investment in 15 year Public Provident Fund Account (PPF)

>>           An individual can open account with INR 100 but has to deposit minimum of INR 500 in a  financial year and maximum INR 1,50,000

>>           Joint account cannot be opened.  o Account can be opened by cash/Cheque and In case of Cheque, the date of realization of  Cheque in Govt. account shall be date of opening of account.

>>           Nomination facility is available at the time of opening and also after opening of account.  Account can be transferred from one post office to another.

>>           The subscriber can open another account in the name of minors but subject to maximum  investment limit by adding balance in all accounts.

>>           Maturity period is 15 years but the same can be extended within one year of maturity for  further 5 years and so on.

>>           Maturity value can be retained without extension and without further deposits also.

>>           Premature closure is not allowed before 15 years.

>>           Deposits qualify for deduction from income under Sec. 80C of IT Act.

>>           Interest is completely tax-free.  o Withdrawal is permissible every year from 7th financial year from the year of opening  account.

>>           Loan facility available from 3rd financial year.

>>           The PPF account can be opened in a Post Office which is Double handed and above.  o From 01.07.2019, interest rate is 7.9% per annum (compounded yearly).

>>           Minimum Amount for opening of account is ₹ 100 but has to deposit minimum of ₹500 and  Maximum limit is ₹ 1,50,000 in a financial year.

>>           Deposits can be made in lump-sum or in 12 instalments.

9.   Investment in National Savings Certificate (NSC)

(A)   National Savings  Certificates  (NSC)  & 5 Years National  Savings  Certificate (VIII  Issue)

Interest Payable, Rates, Periodicity etc. Minimum Amount for opening of account and maximum balance that can be retained.
From 01.07.2019,  interest rates are as  follows:

–          7.9%  compounded  annually but  payable at  maturity.

–          INR 100 grows to  INR 146.25 after  5 years

–          Minimum of  ₹1000 and in  multiples of ₹100

–          No Maximum  Limit

(B)   Salient Features including Tax Rebate in case of Saving in National Savings Certificate (NSC)

>>           A single holder type  certificate can be  purchased by, an adult for  himself or on behalf of a  minor or by a minor.

>>           Deposits qualify for tax  rebate under Sec. 80C of  IT Act.

>>           The interest accruing  annually but deemed to be  reinvested under Section  80C of IT Act.

  • In case of NSC VIII, transfer of certificates  from one person to  another can be done  only once from date of  issue to date of
  • At the time of transfer of Certificates from  one person to another,  old certificates will not  be discharged. Name of  old holder shall be  rounded and name of  new holder shall be  written on the old  certificate and on the  purchase application  (in case of non CBS  Post offices) under  dated signatures of the  authorized Postmaster  along with his  designation stamp and  date stamp of Post

10. Investment in Kisan Vikas Patra (KVP)

Certificate can be purchased  by an adult for himself or on behalf of a minor or by two adults.

KVP can be purchased from any Department Post Office.

>>           Facility of nomination is available.

>>           Certificate can be transferred from one person to another and from one post office to another.

>>           Certificate can be encash after 2 & 1/2 years from the date of issue.

>>           From 01.07.2019, interest rates is 7.6% compounded annually. Amount Invested doubles in  112 months (9 years & 5 months)

>>           Minimum Amount for opening of account is ₹ 1000 and in multiples of ₹100 No Maximum  Limit.  K.

11. Investment in National Pension Scheme (NPS)

National Pension Scheme is a voluntary contribution pension scheme that aims to provide  financial security to policy holders post-retirement. NPS is regulated by the Pension Fund Regulatory  and Development Authority or PFRDA.

In addition to the deductions claimed under section 80C, if you choose to make an additional  contribution of Rs 50,000 into your NPS account, you may claim a tax deduction on the additional  amount paid under section 80CCD(1B).

As a result, you qualify for two separate tax deductions of ₹1,50,000 and ₹50,000 (under Section  80CCE and 80CCD(1B)) respectively for the NPS contribution.

[Section 80C]- Deduction allowable from income for Payment of life Insurance Premium 

(a)           life insurance premium paid in order to effect or to keep in force an insurance on the life of  assessee or the life of the spouse or any child of assessee and in the case of HUF, premium  paid on the life of any member thereof under an insurance policy (other than a contract for a  deferred annuity), issued on or before the 31st day of March 2012 shall be eligible for  deduction only to the extent of 20% of the actual capital sum assured or actual premium paid  whichever is less.

(b)          life insurance premium paid in order to effect or to keep in force an insurance of the life of  the assessee or on the life of the spouse or any child of assessee and in the case of HUF,  premium paid on the life of any member thereof, under an insurance policy (other than a  contract for and deferred annuity), issued on or after the 1st day of April 2012 shall be  eligible for deduction only to the extent of 10% of the actual capital sum assured actual  premium paid whichever is less.  Where the policy, issued on or after the first day of April, 2013, is for insurance on life of any  person. Who is—

(i)   a person with disability or a person with severe disability as referred to in section 80U, or

(ii)   suffering from disease or ailment as a specified in under section 80DDB, deduction  under the section is allowed only to the extent of 15% of the actual capital sum assured  or actual premium paid whichever is less.

(c)           contribution to deferred annuity plans in order to effect or to keep in force a contract for  deferred annuity, on his own life or the life of his spouse or any child of such individual is  eligible for deduction, provided such contract does not contain a provision to exercise an  option by the insured to receive cash payment in lieu of the payment of annuity.

(d)          Contribution to annuity plans IIC new Jeevan Dhara and and new Jeevan Akshay is eligible  for deduction.

Note: The aggregate amount of deduction under section 80C, 80CCC and 80CCD(1) shall not  in any case exceed ₹1,50,000. 

12. Investment in ICICI Prudential Term Life Insurance plan

(A)   High Life Insurance Amount at affordable premiums:

Term insurance plans provide large  amount life insurance cover at an affordable premium. This cover can compensate for several  years of lost earnings.

(B)   Cover Against Critical Illnesses:

Along with providing life cover, a new-age term plan like  ICICI Prui Protect Smart also provides protection against critical illnesses. For a small  additional premium, Critical Illness Cover provides lump sum payments when a critical  illness like a heart attack, cancer, kidney failure etc is first diagnosed.

(C)   Support In Case Of Disability:

In new-age Term plans such as ICICI Prui Protect Smart,  the insurance company pays your future premiums in case of total and permanent disability.  As a result, your life insurance cover continues even if you are unable to pay premiums.

(D)   Additional Security:

To increase the security of your family, a Term Policy provides  additional pay-out (up to ₹2 crores) in case of an accidental death. For example, if your Life  Cover is ₹1 crore, a Term Insurance plan with Accident Cover pays ₹2 crores to your family  in case of an accidental death.

(E)   Tax Benefits:

Term Insurance plans offer tax benefits on premiums paid up to ₹46,800 under  Section 80C. New-age Term plans with critical illness cover also offer additional tax benefits  on premiums paid up to ₹7800 under Section 80D. You also get tax benefits^^ subject to  conditions under Section 10(10D) on the money that your family receives in case of an  unfortunate event.

13. Investment in Unit Linked Investment Plan (ULIP)

ULIPs or Unit-Linked Investment Plans offer the dual benefit of insurance and investment.  Therefore, the premium that you contribute towards a ULIP policy is partially invested in money  market instruments, equity or debt by the insurance company.

You may choose either Unit Linked Insurance Plans (ULIPs) or traditional life insurance plans to  avail tax exemptions under Section 80C.

Major part of your premium is allocated towards your investment goal. The balance amount is  utilised to provide an insurance cover. As a result, ULIP premiums are eligible for deductions as per  Section 80C of the Income Tax Act 1961. While the returns from the policy may vary from 5% to 10%  (based on the plan and market volatility), the maturity proceeds are tax-free.

ULIPs; however, have a lock-in period of 2 years. Thus, you will not be able to avail of any tax  benefits under Section 80C, if you choose to discontinue the ULIP before the lock-in period expires.

14. Investment in Retirement Plans

Premium payments made up to ₹1,50,000 for retirement plans are tax exempted under section  80CCC (This maximum limit; however, is the aggregate deduction that you may claim under sections  80C, 80CCC and 80CCD).

Moreover, the withdrawals are subject to taxation and only one-third (1/3) of the maturity sum that you  will receive at the time of retirement will be tax-free.

The remaining two-thirds (2/3) of the maturity sum will be disbursed as an annuity, and therefore, is  subject to taxation as per the prevailing tax rate at the time of your retirement.

15. Tax benefits on LIC Insurance Policies under section 80CCC:

Section 80CCC comes under the umbrella of section 80C and offers tax exemption to customers  who are paying insurance premium from their taxable income towards any annuity plan that promises  them payment of pension in the later year.

>>           Tax benefits under section 80D which are applicable to LIC insurance policies

>>           Almost all health insurance related tax benefits come under the purview of section 80D of the  Income Tax Act. Let us look into each of these deductions in detail.

>>           Up to ₹25000 is allowed as deduction for customers who have paid money towards  government health insurance scheme or health insurance for self or family or on account of  health check-up of either the policyholder or his/her family

>>           Additional ₹25000 worth of deduction is allowed in case you have paid premium towards  keeping up the health insurance or health check-up of parents whether dependent or not

>>           In case, for the above two points of exemption, any of the members is above 60 years of age  then the deduction will go up by ₹5000 and the allowed limit changes to ₹30,000

>>           In case any of the health check-ups made above are preventive in nature then the maximum  limit allowed is ₹5000

>>           For HUFs, deduction allowed is up to ₹25,000 if the amount is paid towards availing health  insurance for any member of the HUF

Note:     For deduction purposes, the mode of payment for health insurance plays an important role. The  mode of payment can be cash or any other mode for preventive health check-up while for any other  medical issue listed above the payments needs to be made in any mode other than cash. 

16. Tax benefits on LIC Insurance Policies under section 80DD:

Section 80DD of the Income Tax Act comes under section 80D and deals with tax exemption for  any person who is depositing a certain amount with LIC for maintenance of a handicapped person. The  limit for this deduction is ₹50,000. In case, the disability suffered by the handicapped person is severe,  then the limit is increased to ₹1,00,000. Jeevan Aadhar plan from LIC is aimed towards meeting this  particular insurance need of customers.

17. Tax benefits on LIC Insurance Policies under section 10 (10D):

Any death claims or maturity benefits received by a policyholder are eligible for tax exemption  under section 10(10D) of the Income Tax Act. Here are a few possibilities that are included under this.

>>   First and foremost point about application of this tax benefit is that the main insurance policy  should not have been issued under section 80DD or as a keyman policy.

>>   Up to 20% of the actual sum assured is exempt from tax for policies issued on or after  1.4.2013

>>   Up to 10% of the actual sum assured is exempt from tax for policies issued on or after  1.4.2012

>>   These insurance policies should be issued for life protection of a person suffering from severe  disability as referred in section 80U or suffering from an ailment listed in section 80DDB

Listed above are the various tax exemptions that are applicable to insurance policies offered by  LIC to customers in India. However there is a very important point that needs to be kept in mind while  availing insurance and looking for tax benefits to be reaped out of it.

That point is – Maximum deduction allowed as tax benefit is ₹1,50,000 and includes all other  tax exempted financial products too which fall under section 80C of the Income Tax Act. Also, the  combined maximum limit for deduction under section 80C, 80CCC and 80CCD is ₹1.5 lakh,  currently.

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