financial planning and taxation in insurance

8/7/2019 financial planning and taxation in insurance

1/16

FINANCIAL PLANNING AND

TAXATION IN INSURANCE

By: -

Group B

VCE

By: -

Group B

VCE


2/16

Insurance plays a critical role in risk management of your

life and investment portfolio.

Insurance is an important element of any sound financial

plan.

Different types of insurance protect you and your loved

ones in different ways against the cost of accidents, illness,

disability, and death.

Introduction


3/16

While it is important for individuals to have life cover, it is equally

important that they buy insurance keeping both their long-term financial

goals and their tax planning in mind.

Tax planning and financial planning should go hand in hand and

help individuals face the good times as well as the adverse

circumstances.

In the tax planning exercise, the long-term financial goals should notbe lost.


4/16

Financial PlanningFinancial Planning

Financial planning is a process of managing money.

It is a roadmap to Financial Health & SustainableWealth creation.

Financial planning is the process of successfully meeting financial

needs of life through the proper management of finances.

Financial planning is a systematic approach whereby the financial

planner helps the customer to maximize his existing financial resources

by utilizing financial tools to achieve his financial goals.


5/16

Financial planning is simple mathematics. There are 3 major

components :

Financial planning is simple mathematics. There are 3 major

components :

Components

Financial

Resources(FR)

Financial

Tools (FT)Financial

Goals (FG)


6/16

Financial Planning in Insurance??Financial Planning in Insurance??

It is to manage the financial resources which are coming to the

Insurer in the form of Consideration or Insurance premium

It is to review a variety of documents that are:-

Insurance plans

Annuity plans

Pension plans

Financial Contracts and Company financial policies


7/16

Objectives: -Objectives: -

Adequate funds have to be ensured.

Determining financial requirements.

Determining financial structure.

Ensuring the solvency for insurer .

Framing financial policies with regards to cash control,

Investments & Investments etc.


8/16

Taxation in InsuranceTaxation in Insurance

Though there are multiple modes for saving tax, life insurance is one of

the most effective tax planning instrument

The benefits under tax are of two types:

1. Deductions 2. Exemptions

Tax benefits in insurance can be:

Life insurance plans are eligible for tax deduction under Sec. 80C.

Pension plans are eligible for a tax deduction under Sec. 80CCC.

Health insurance plans/riders are eligible for tax deduction under Sec.80D.

The proceeds or withdrawals of life insurance policies are exempt under

Sec 10(10D), subject to norms prescribed in that section


9/16

Tax benefits in insuranceTax benefits in insurance

Under Section 80CCC, If premiums are paid for any pension plan, will

receive pension from a fund referred to in Section 10(23AAB) and will be able

to avail a deduction of up to Rs 1,00,000 from the total income.

The maturity proceeds of life insurance policies are not taxable.

Under pension plans, even withdraw up to one-third of the total maturity

amount in cash and the same would be tax-free.

If you chose to discontinue a Unit Linked Insurance Plan before paying for5 years from commencement of policy, you are not entitled to any tax

benefits.


10/16

The basic income tax exemption limit has been raised from

Rs1,50,000 to Rs1,60,000.

The exemption for women asseesee has been raised from

Rs1,80,000 to Rs1,90,000, and

For senior citizens it's raised from Rs2,25,000 to Rs2,50,000.

Category Age(years) ExemptionLimit(Rs.)

A very senior

citizen

80 and above 5,00,000

Senior citizens 60 2,50,000

Exemptions on Life Insurance premium


11/16

Life insurance premium paid by a person for his wife/husband's policy

qualifies for a deduction under Section 80C of the Income Tax Act, 1961.

If a person stop premium payments of his policy, it amounts to

Discontinuation of the policy and qualifies for Income Tax. In this case he

cannot claim any tax benefits. In case he discontinue his premiums after

paying for 2 years from commencement of the policy, no tax deduction is

allowed on premium paid in the year when policy terminates. The amount of

tax deduction allowed on the premium paid in the preceding year, is also

taxable in the year when policy terminates.

Service tax is applicable, on the risk cover & fund related charges towards

management of investments ofUnit Linked Insurance Products included in life

insurance premium in accordance with Section 65(105)(zx) ofFinance Act

1994,

Contd..


12/16

HEALTH INSURANCE:

Deduction allowable upto Rs.15,000/- if an amount is paid to keep in force

an insurance on health of assessee or his family (i.e. Spouse & children).

Additional deduction upto Rs.15,000/- if an amount is paid to keep in force

an insurance on health of parents .

In case of HUF, deduction allowable upto Rs.15,000/- if an amount is paid

to keep in force an insurance on health of any member of that HUF


13/16

Jeevan Aadhar Plan (Sec.80DD) :

Deduction from total income upto Rs.50,000/- allowable on amount

deposited with LIC under Jeevan Aadhar Plan for maintenance of anhandicapped dependent (Rs.1,00,000/- where handicapped dependent is

suffering from severe disability).

Jeevan Nidhi Plan & NewJeevan Suraksha - I Plan (U/s.80CCC)

A deduction to an individual for any amount paid or deposited by him from

his taxable income in the above annuity plans for receiving pension (from

the fund set up by the Corporation under the Pension Scheme) is allowed.

NOTE: The premium can be paid upto Rs.1,00,000/- to avail deductionu/s.80C, 80CCC & 80CCD (80CCD- Deduction in respect of contribution

to pension scheme of Central Government.).

Under Section 10(10A) (iii) of the Income-tax Act, any payment received

by way of commutations of pension out of the Jeevan Suraksha &

Jeevan Nidhi Annuity plans is exempt from tax under clause (23AAB).


14/16

Under the provisions of section 10(10D) of the Income-tax Act, 1961,

Maturity/Death claims proceeds of life insurance policy, including thesum allocated by way of bonus on such policy (other than amount to be

Refunded under Jeevan Aadhar Insurance Plan in case of handicapped

Dependent predeceases the individual or amount received under a

Keyman Insurance Plan) is exempted from income-tax. However any

sum (not including the premium paid by the assessee) received underan insurance policy issued on or after the 1st day of April, 2003 in

respect of which the premium payable for any of the years during the

term of the policy exceeds 20% of the actual capital sum assured will no

longer be exempted under this section.


15/16

Interest on loans taken against an insurance policy is allowed

as a deduction from income chargeable under the head Income

from house property provided the amount of loan is used by the

policyholder to acquire/construct /reconstruct/repair or renew any

Property.

Contribution to deferred annuity Plans in order to effect or to

keep in for a contract for deferred annuity, on his own life or the

life of his spouse or any child of such individual, provided suchcontract does not contain a provision to exercise an option by the

insured to receive a cash payment in lieu of the payment of

annuity is eligible for deduction.


16/16

THANK YOU

financial planning and taxation in insurance

Documents