Income Tax * is one of the most prominent topics discussed by many people working in varied sectors. It is a type of direct tax * paid to the Government based on the income earned from different sources. The Government of India has made paying Income Tax * mandatory, considering the importance of infrastructural development to benefit every citizen of the nation.
Therefore, it is a legal mandate as well as a moral obligation for you to fulfil your tax liability. However, people are often sceptical about calculating the tax on salary, considering it to be a difficult process. Here is a simple guide to explain how you can calculate income tax * .
According to Section 80C of the Income Tax Act, 1961, you can claim a total tax * deduction of ₹1,50,000. It can include your premium payments towards a Life Insurance Policy, investment in a Public Provident Fund, Equity Linked Savings Scheme, etc. The premium amount you pay towards your term plans and comprehensive life insurance policies such as a guaranteed 1 return plan qualify for tax * deduction.
Guaranteed 1 return plans in India provide a life cover and, additionally, guaranteed 1 returns on maturity. As the returns are guaranteed 1 , you can plan for your family's future financial commitments in a precise manner. The premium amount thus paid qualifies for tax * deduction under Section 80C, and the returns of the plan qualify for tax * exemption under Section 10(10D).
At Tata AIA, we have introduced varied, flexible features in our plans to ensure the most suitable - financial assistance to policyholders based on their individual financial needs. For instance, with Tata AIA Life Insurance, you can decide whether you want the policy payout as a lump sum, regular income, or a combination of the two.
If you have a home loan, the principal paid back in a financial year will qualify for tax * deduction under Section 80C, and the interest portion of the premium up to ₹2 Lakh shall be considered under Section 24.
And, if you have invested in retirement solutions such as the National Pension Scheme, you can get a tax deduction under Section 80CCC(1B) up to a maximum of ₹50,000. This deduction is over and above the ₹1,50,000 deductible under Section 80C.
Tax Rates as per the Old Regime:
5% of Taxable Income
₹12,500 + 20% of the Income above ₹5 Lakh
₹1,12,500 + 30% of the Income above ₹10 Lakh
Tax Rates as per the New Regime:
₹12,500 +10% of the Income above ₹5 Lakh
₹7.5 Lakh to 10 Lakh
₹37,500 + 15% of the Income above ₹7.5 Lakh
₹10 Lakh to 12.5 Lakh
₹75,000 + 20% of the Income above ₹10 Lakh
₹12.5 Lakh to 15 Lakh
₹1,25,000 + 25% of the Income above ₹12.5 Lakh
₹1,87,500 + 30% of the Income above ₹15 Lakh
The tax * rates as per the New Tax Regime are lower than the previous tax * rates. However, this regime does not allow the taxpayer to avail of several exemptions and deductions. Some of the prominent components are:
It is important to read the different aspects associated with these components carefully before computing your tax. You can purchase savings plans with tax benefits for life cover and ensure savings for the long term as well as tax * relief.
Life insurance can be a valuable financial tool for many people, but the decision to purchase a policy should be based on a variety of factors beyond just tax savings. While it is true that some life insurance policies in India offer tax benefits, these benefits should not be the primary reason for purchasing a policy.
When you buy life insurance with the sole aim of saving taxes * or getting tax benefits, you may not be able to choose a suitable policy that meets your family’s future requirements. As a result, when the need arises, the life insurance plan will be unable to provide adequate financial assistance to your loved ones.
In India, premium payments for life insurance policies are eligible for tax * deductions under Section 80C of the Income Tax Act, up to a maximum limit of ₹1.5 Lakh per financial year. Additionally, the death benefit received by the nominee is tax-free under Section 10(10D) of the Income Tax Act.
However, the primary reason for purchasing life insurance should be to provide financial security for your loved ones in the event of your unexpected death. Tax * benefits can be a secondary consideration, and it's important to choose a policy that meets your specific coverage needs and fits within your budget.
Life insurance riders can help in claiming tax * deductions and exemptions in India, but it depends on the type of rider and the provisions of the Income Tax Act. For example, if you add a critical illness rider # or a health rider to your life insurance policy, the premium for that rider can be claimed for tax deduction under Section 80D of the Income Tax Act, just like you can claim the deduction on health insurance policies.
The other life insurance riders on which you can claim tax benefits are the ones that cover hospitalisation benefits or any similar health rider # that requires you to undergo hospitalisation. This is because these riders offer similar benefits when opposed to health insurance policies. Therefore, the deduction can be claimed on the rider premiums which are added to the base life insurance policy.
Also, note that when a rider # is added to a life insurance policy, there is an additional premium cost for each rider. This is why, even though riders may help you claim tax deductions on the premiums, you should choose which riders you want to add to your policy. Doing so can help you keep your premiums reasonable while enhancing the coverage of your life insurance policy.
It is also advisable to consult with a financial advisor or insurance professional to understand the tax implications of any life insurance policy and riders. They can help you determine whether the riders # you are considering are eligible for tax benefits and how they may impact your overall financial plan.
Income tax* calculation is a simple process if you have the right first-hand knowledge about the basics of taxable income, tax* exemptions, and deductions. Moreover, it is a systematic procedure that takes very little time for calculation. Here's a quick summary of this process:
L&C/Advt/2023/Feb/0611