There is a famous saying “Do Not Step Outside Your Home Without Insurance”. There are no words to describe how important insurance is. The Government too realizes, how important it is that each and every citizen of our country, has insurance. Watch out for the Union Budget 2016 and check out if the Government offers you and other buyers of insurance plans, any benefits.
You have to pay a service tax of 14.5%, on all services you avail in the country. The service tax also includes a Swachh Bharat cess of 0.5%. The premiums you pay for the insurance plan, include the service tax of 14.5%. A high service tax means insurance premiums are high. Medical costs are increasing and it is a matter of time before insurance premiums are hiked.
Service tax is a tax on services and insurance premium does not offer a regular service. Why should you pay service tax when you get no service? You and other buyers of insurance plans want a service tax exemption. If you invest in mutual funds, service tax is charged only on the management and advisory fees. However in case of an insurance plan, service tax is charged on the entire insurance premium. With a service tax exemption, you and other citizens could easily afford insurance plans. Insurance awareness and affordability would increase insurance penetration in the country.
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You want to save tax. You invest in tax saving instruments under Section 80 C of the income tax act, to get a tax deduction up to INR 1.5 Lakhs. You can avail life insurance plans such as a term life insurance plan, endowment life insurance plan, unit linked insurance plan as well as invest in certain other financial instruments such as PPF, ELSS or even a 5 year tax saver FD, to get this benefit. You get this tax deduction, based on the combined investments you make in all financial instruments, eligible for tax deduction (which also includes life insurance), up to INR 1.5 Lakhs under Section 80 C of the income tax act.
You want a separate tax deduction limit, dedicated only for life insurance, which would not be shared with any other financial instrument.
You pay a premium and avail a life insurance plan. If you (policyholder), die before the maturity of the life insurance plan, your nominees get the death benefit. There is no tax on the death benefit. However you are charged a TDS of 2%, on the amount you get on maturity of the life insurance plan, if the premium you pay, exceeds 10% of the sum assured. The insurer pays out the maturity benefits, after deducting the TDS.
You and other buyers of life insurance plans, hope that this TDS on the maturity amount of the life insurance is removed once and for all.
Tune it to the Union Budget 2016 on February 29th 2016.
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