Tuesday, 8 March 2011

Direct Tax Code – How DTC Affect Life Insurance Policies

As per the Budget proposal the Direct Tax Code (DTC) will come into effect from 01st April, 2012. Most of the Tax payers are not aware about the impact of Direct Tax Code in their investment, tax and income. Here we can discuss about the changes of DTC in life insurance policy premiums. The other aspects can discuss in the forthcoming pages.


Most tax payers joined for Life insurance policies with an aim to get tax exemption. At present all life insurance premiums are tax free with the only condition is that the annual premium should not be more than 20% of the sum assured. But under Direct Tax Code you can save tax only for the premium of policies which gives a life cover of at least 20 times of the annual premium. If any life insurance policy is not met this condition you will not get tax exemption for the premium amount and also the income arise from the policy is taxable. Now this income is not taxable.

At present life insurance policies are exempted under section 80C of income tax act and you can get exemption of Rs. 100000 for life insurance and other tax free investments. But under Direct Tax Code the maximum exemption limit is Rs. 50000 for life insurance, Tuition fee of children and Medical Insurance together. So keep this in mind when you join for a new life insurance policy.

Go for a life insurance policy which has a high term of more than 20 years and low premium amount. Unless you will not get tax exemption for the premium amount and the amount you earn from the policy will be taxable. This is applicable for Unit Linked Insurance Plan (ULIP) also. Make your tax planning accordingly.

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7 comments :

  1. [...] also will be changed. Some investments will be out from the status of tax … Continue reading ? Direct Tax Code – How DTC Affect Life Insurance Policies As per the Budget proposal the Direct Tax Code (DTC) will come into effect from 01st April, 2012. [...]

    ReplyDelete
  2. [...] Net Asset Value (NAV) of the first 100 months to the investor. It is a close … Continue reading ? Direct Tax Code – How DTC Affect Life Insurance Policies As per the Budget proposal the Direct Tax Code (DTC) will come into effect from 01st April, 2012. [...]

    ReplyDelete
  3. [...] Net Asset Value (NAV) of the first 100 months to the investor. It is a close … Continue reading ? Direct Tax Code – How DTC Affect Life Insurance Policies As per the Budget proposal the Direct Tax Code (DTC) will come into effect from 01st April, 2012. [...]

    ReplyDelete
  4. [...] citizen those who have completed the age of 60 years and for small tax … Continue reading ? Direct Tax Code – How DTC Affect Life Insurance Policies As per the Budget proposal the Direct Tax Code (DTC) will come into effect from 01st April, 2012. [...]

    ReplyDelete
  5. Kindly suggest what would be the Impact of DTC on existing policies???
    Pls suggest...

    ReplyDelete
  6. At present nobody can say about DTC correctly. When the policies are clear and published we can know more about it

    ReplyDelete
  7. [...] in August. The measures associated with service tax may be enforced through notifications, however tax related changes might need to wait till the budget because the law must be [...]

    ReplyDelete