Explanation of Tax Benefits

Premiums paid for Life insurance - Deduction under Section 80C

1. Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.
2. Eligible Savings: Premiums paid or deposited by assessee to effect or to keep in force insurance on the life of following persons:
   • In case of individual assessee – Himself/Herself, spouse, children of such individual
   • In case of HUF assessee – any member
3. 20% limit: If the amount of premium paid in a financial year for a policy is in excess of 20% of the actual capital sum assured, then deduction will be allowed only for premiums upto 20% of the sum assured.
4. Limit on amount of deduction: Deduction will be restricted to investments upto Rs 100,000 in savings specified under Section 80C (including life insurance premiums). If any investments have been made under Section 80CCC and 80CCD, then the qualifying amount under Section 80C will stand reduced to that extent.

Premiums paid for Pension plans - Section 80CCC

1. Permitted Deduction: Section 80CCC allows for deduction of premiums paid under a pension plan. As per this Section, premiums paid upto Rs 10,000 (till FY 2005-06) & Rs. 1 Lakh (from FY 2006-07) by an individual is allowed as deduction from his total income.
2. Disallowance: This benefit will be reversed if the policy lapses / is cancelled.
3. Limit: It may be noted that from FY2005-06, the limit of deduction under Section 80CCC will be part of the overall limit prescribed under Section 80CCE.
4. Receipt under Policy: Amounts received on surrender (whole/part) of annuity plan, amounts received as Pension is taxed as income.

Premiums paid for medical insurance - Section 80D

1. Category of assesses allowed deduction: Individual assessee and Hindu Undivided Family assessee.
2. Eligible premiums: Premiums paid by assessee by any mode other than cash out of his taxable income to effect or to keep in force an insurance on the health of following persons:
   • In case of individual assessee – Himself/Herself, spouse, dependant children and parents. The condition of dependency of parent has been removed from FY 2008-09. In other words, even if the parent is independent, the individual can pay the premia and claim the deduction.
   • In case of HUF assessee – any member of HUF
3. Deduction and upper limit: The qualifying amounts under Section 80D for self, spouse and dependent children is upto Rs. 15,000/- and additional deduction upto Rs. 15,000/- for the parents (from FY 2008-09 onwards). However, a higher amount of upto Rs 20,000/- is permitted if the person, for whose health insurance the premium was paid, was aged 65 years or more at any time during the financial year in which the premium was paid. Such amounts of premium paid would be allowed as deduction from the total income of the assessee.

Overall deduction limit - Section 80CCE

A new Section 80CCE has been inserted from FY2005-06. As per this section, the maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC and 80CCD will be limited to Rs 100,000.

Benefits under insurance policy - Section 10(10D)

As per Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax.
However, this rule does not apply to following amounts:

• sum received under Section 80DD(3), or
• any sum received under a Keyman Insurance Policy, or
• any sum received other than as death benefit under an insurance policy which has been issued on or after April 1 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the sum assured.

Tax Rates for Individuals

The rates of income-tax for FY 2008-09

Total Income (Rs.)	Rate of Tax
	Senior Citizen	Women below 65 years	Others
Upto Rs 150,000/-	Nil	Nil	Nil
Above Rs 150,000/- to 180,000/-	Nil	Nil	10%
Above Rs 180,000/- to 225,000/-	Nil	10%	10%
Above Rs 225,000 to Rs 300,000	10%	10%	10%
Above Rs 300,000 to Rs 500,000	20%	20%	20%
Above Rs 500,000/-	30%	30%	30%

Surcharge on Income Tax:

In case where the Total Income exceeds Rs 10,00,000, there would be a surcharge @ 10%.Marginal relief is available to assessee whose income just exceeds Rs. 10,00,000.

Education Cess on Income Tax

Edcuation Cess @2% will be payable on the amount of income tax (including surcharge).

Secondary & Higher Education Cess on Income Tax

Additional Education Cess @1% will be payable on the amount of Income tax (Including surcharge).