Tax saving pf fd and insurance tax relief - rajkotupdates.news

 

Insurance Tax Relief And Tax Saving PF FD

Tax saving pf fd and insurance tax relief are two important topics that you should understand. The correct way to calculate these taxes can be confusing, so we have created this article to help you understand how they work.

Insurance Tax Relief And Tax Saving PF FD
Insurance Tax Relief And Tax Saving PF FD

Tax Exemption On PPF

You can claim a tax deduction on your contributions to the PPF account. The interest earned on your investments is also exempt from income tax and you don’t have to pay any other taxes for this. However, as per section 80C of the Income Tax Act 1961 (ITA), you won’t be able to claim any deductions under section 80C if your total expenditure exceeds Rs 50,000 in a financial year.

Tax Exemption On Tax Saving FD

  • A tax exemption is given on a tax saving fixed deposit (TDS FD).
  • To avail the benefit of this facility, you need to open a TDS FD with an interest rate of at least 2% per annum. The minimum amount that can be deposited in your account is Rs 10,000 and maximum limit for opening an account is Rs 1 lakh per year. You must also have no outstanding debts with banks or financial institutions as per rules laid down by Reserve Bank of India (RBI).
  • After opening your account, you can use it for any purpose like saving money for future use or investing in stocks/bonds etc., which will help you earn higher returns from your savings over time.

Tax Exemption On Epf

EPF is a long-term savings scheme for retirement. It is a statutory scheme, which means that it is established by law. EPF is also known as Voluntary Pension Scheme or VPS and Social Security Measure (SSM) in some countries.

In India, you can make an investment into your EPF account from the age of 18 years onwards with an annual contribution limit of 10% of your salary up to Rs 6 lakhs per year. You can withdraw money from your account at any time after withdrawing half of the corpus accumulated in it during each financial year but not exceeding 40% of total balance held in all accounts under SSM/VPS combined with other sources such as HRA, PFY etc. However if there are other sources like PPF then you cannot withdraw money from two different accounts simultaneously so make sure to keep track where your money is going before making any decisions.

Tax Exemption On ELSS

ELSS is a long term investment scheme which means you can invest in it for ten years or more. It can be bought through mutual funds and the benefits are similar to regular saving schemes like PPF, EPF etc. The interest earned from these funds is completely exempt from income tax as well as wealth tax if you have invested in an ELSS scheme for at least five years continuously till 31st March of the year in which you want to withdraw your money (as per Section 11A(9)(ii) of Income Tax Act).

LIC Premium Tax Saving Scheme

The LIC Premium Tax Saving Scheme (LCTPS) is a tax saving plan introduced in 2015 by the Government to encourage investment in life insurance policies. The LCTPS allows you to make a lump sum payment of any amount, as long as it is invested in one of the following instruments:

  • Term Plan - an endowment plan that provides income for life from maturity or death.
  • Permanent Annuity Plan (PAP) - An annuity contract where premiums are paid for a fixed period at regular intervals until withdrawal at the end of this period; such payments continue for your lifetime and may be repaid when you die.

If you want to make use of these benefits, your savings must be kept with Life Insurance Corporation Of India Limited (LIC).

Tax Exemption On NPS

NPS is a long-term saving scheme, which means that you can invest in it at any age. This is different from other tax-saving schemes such as EPF and LSS, where the minimum age for opening an account is 18 years old.

You can also invest in NPS if you are between 18 and 60 years old. However, there are some conditions attached to this investment option:

  • You need to be earning less than Rs 15 lakh per annum.
  • Your contribution shall not exceed 15% of your income.

How is tax relief on insurance calculated?

Tax relief on insurance is calculated based on the amount invested and the age of your investor. If you invest in a PFR scheme, then you will get tax relief at source from your employer or pension provider.

If you are not an employee or self-employed, then HMRC will calculate your tax-free savings allowance (TSA) for each year that you have been contributing to your pension product. This means that if someone who has never worked before does not have any other income or assets, then they can contribute up to £4,000 per year into their personal pensions without paying any income tax or National Insurance Contributions (NICs).

If they make additional contributions above this level during that year then they will pay income tax on those extra funds when they withdraw them at retirement age after holding onto them for five years under their TSA limit.


Newest information about tax relief for insurance and FDs?


  • Senior citizens have been exempted from paying tax on their insurance policies under Section 80C. The provision has been introduced to give relief to senior citizens who are not able to claim any other deduction or credit in their income tax return. The maximum limit of deduction available under this section is Rs 1 lakh per annum per person or family member if they have a total income less than Rs 6 lakhs in a financial year (FY).
  • The government has also extended this exemption for life insurance policies purchased after December 31, 2011 and term endowment plans for five years starting from June 1st 2013 till FY2022 with effect from April 1st 2016 onwards subjecting them only half way through that period when it was announced earlier but now revised up with more scope for senior citizens' benefit.

Conclusion

The tax break on insurance premium is an incentive for people who buy life insurance policies. However, it is only applicable to those who have purchased the policy before April 12, 2018.

For example, if you buy an insurance policy from April 1 onwards and pay the premium upfront, then you will get 60 per cent tax exemption on it. In case of a term plan as well as hybrid plan (for which both death benefits and maturity values are included in one single account), consolidation of both types of policy can lead to tax savings up to 80 per cent.

This means that if your premiums are less than Rs 20 lakhs per annum and you opt for this type of plan while saving in PPF or EPF (exemption limit is Rs 1.5 lakhs), then your overall taxes would come down by almost Rs 2 lakhs even after deducting the sum insured under the policy itself.

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