Page 28 - IC23 life insurance application

Section C

Tax benefits under insurance policies.

Very often, as an insurance agent, you would confront questions relating to taxation

of the life insurance policies. "whether I will get any tax rebate on the premium that I

shall pay towards my Insurance?" "Whether the money when received after my

death , shall be taxed in the hands of my wife or children?" "Whether the bonus

amount paid with the sum assured is taxable?"

We have already covered this subject chapter "Legislative and Regulatory matters"

However Just to refresh , we will state certain main points. But let it be emphasised

that Income Tax law is subject to review every year at the time of presentation of the

Government of India's budget. An agent therefore would do well to go through the

budget speech of the Finance Minister every year on the 28th of February to keep

himself abreast with the latest changes. Changes are expected to be very

widespread and radical in the coming years in view of the entry of the private players

into the field of insurance. However some of the general features may be worth

mentioning:

1) Under sec.10(10 D), any sum received under life insurance policy, including

bonus, guaranteed addition, final and terminal bonus is exempt from income Tax.

Only exception is the money received under keyman's insurance policy.

2) Premium paid towards any insurance policy including that of spouse, children,

married or unmarried is also entitled to an Income tax rebate under sec 88 of the

income tax Act to the extent of 20%. In other words, if the annual premium of 60,000

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