Tax Exemption with Insurance

  1. Tax Exemption can be understand by Exemption in Taxable Income before calculating the Income Tax, with the help of Tax Exemption anybody can reduce the rates of income tax by cutting down the taxable income.

In Tax Exemptions, you can exempt the amount related to yourself, your spouse, your children and your dependents.

There is direct link between Tax Exemption  & Insurance.

In current scenario we have three types of Insurances;

  1. Life Insurance
  2. Health Insurance
  3. General Insurance

We can have Tax Exemptions in Life and Health Insurances as per Income Tax Act.

In Life Insurance, you can get Exemption under Income Tax Act 80(C), for the entire premium you have paid in a Financial Year, 100% Exemption is allowed with maximum limit of Rs 1,50,000/- per Financial Year. The life insurance can be of yours, yours spouse where you are proposer and of your children including the Child Education/Marriage Plan.

In Health Insurance, you can get Exemption under Income Tax Act 80(D), for the entire Premium paid by you for Health policy of yourself / your Family / or even your Parents. Here, under this Act you can have 100% exemption as per below grid;

Health Insurance Covarage Maximum Limit
Self and/or family Rs.25,000
Self and family/or + Parents Rs.(25,000 + 25,000) = Rs.50,000
Self and family/or + senior citizen Parents Rs.(25,000 + 30,000) = Rs.55,000
Self (senior citizen) and/or family + senior citizen Parents Rs.(30,000 + 30,000) = Rs.60,000

Above mention amount (upto) will directly get Exempted from your Taxable Income before the Income Tax Calculations.

If you want to have Exemptions with help of Insurances you can have maximum Exemptions as per grid;

Scenario Maximum Exemption Tax Slab Surcharge Cess Income Tax Surcharge Cess Exempted Tax (Max)
Self    175,000.00 30% 15% 3%     52,500.00    7,875.00    1,811.25           62,186.25
Self and/or Family + Parents    200,000.00 30% 15% 3%     60,000.00    9,000.00    2,070.00           71,070.00
Self and/or family + Sr Citizen Parents    205,000.00 30% 15% 3%     61,500.00    9,225.00    2,121.75           72,846.75
Self (Sr Citizen) and/or family + Sr Citizen Parents    210,000.00 30% 15% 3%     63,000.00    9,450.00    2,173.50           74,623.50

Besides these exemptions there is one more Act 10(10D), we will have brief article shortly…….

Amit Saxena

Financial & Insurance Consultant
MaxLife Insurance Co Ltd & MaxBupa Health Insurance

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