Health Insurance And Tax Benefit

Health-Insurance-And-Tax-Benefit
Health is Wealth or You may say Health is the greatest assets for a human being. Our overall health is severely affected by our lifestyle. Unhealthy Eating Habits, Lack of Adequate Sleep, Stress can affect our health. A Mediclaim policy acts as savior & it protect you from facing a financial crunch in a medical emergency. Since Inflation has made medical bills costlier, having a heath insurance policy is necessary as other necessities.

There are dual benefits of the health insurance. First it ensures your financial stability and give coverage against expensive medical bills and also offer you benefit of Tax Deduction under section 80D upto Rs.25,000/- to Rs.30,000/- (for Senior citizen).

In order to enjoy tax deductions along with health coverage, you need to check which policy suits you & your family and how much premium required for. The premium amount paid by you can be utilize as Tax Rebate Tool. Remember, if the premium paid by your employer, you will not be eligible for tax rebate. Under the IT Act, 1961 medical allowance is not considered as an allowance, which is exempted. 

Generally, medical allowance is confused with medical reimbursement. Medical reimbursement is paid by an employer to their employees when they submit medical bills. 

When it comes to tax planning, people generally don't consider their parent's health insurance as a tax saving tools. If you are paying for your parents health insurance, you can claim upto Rs.30,000/- as tax deduction benefit in your annual income tax return. 

Which is better Paid-Up or Surrender?

Which-is-Better-Paid-Up-of-Surrender-of-LIC-Policy !!
A life insurance policy in which if all the premium payments are complete till some specified period and insured person is free of all payment obligations and the policy stays intact until insured's death or termination by its maturity or Surrender of the policy is called Paid-Up Policy.

Life Insurance Policies usually last the insured person's lifetime or maturity period, but some some policies can be paid up completely till a specified period. Only Traditional Life Insurance Plans can be a Paid Up Policy. 

It is calculated as the ratio of number of premium paid to the total number of premiums payable multiplied by the Sum Assured value.

 i.e. Paid-Up Value = No. of Premium paid /No. Premiums Payable X Sum Assured.


For Example:  Pradip has one traditional Endowment Policy having Sum Assured Value Rs.2,00,000/- and the policy tenure is 16 years. Unfortunately Pradip did not able to continue his policy after continuing is upto 8 years full premium paid. 
Now from very next year he did not paid any due premium to make it continue, hence very next year this policy become automatically a Paid-Up policy.

Which is better Paid-Up or Surrender of Policy?
Now, Pradip has two option either he can go and surrender his policy by providing all necessary documents to the branch or let it become Paid-Up.

Also Read : How To Surrender An LIC Policy ??

A Policy can be paid-up from next premium due. Suppose I continue my policy up-to 8 years and from next year I fail to pay premium then it become automatically Paid-up to its proportionate to its  premium paid ; Payable And Sum Assured.

Every Insurance Plan has it surrender value which can be known from servicing branch. Its is approx 30% of Sum Assured in regular plan and up-to 90% in single premium plan.

If we calculate in both condition then we can make comparison itself and understand which is better. For Example you have S.A.=2,00,000/-; Tenure - 16 Years; Premium - Rs.13000 (Approx); Premium Paid up-to full 8 years.

Surrender Value : Rs.2,00,000 X 30% = Rs.60,000/-  (Immediate Payment)

Paid-Up Value : Rs.2,00,000 X 8/16 = Rs.1,00,000/- + Vested Bonus  (Payment after death or maturity)

You can decide which is better. On Surrender you will get immediate payment while on letting Paid-Up of Policy you will get after death or maturity which ever is earlier)

Insurance And Tax Savings

Insurance-And-Tax-Savings-Tips
Earlier we says for Insurance nowadays we also add Insurance with Tax Savings. Mostly people invest for tax saving purpose. And before taking any insurance plan peoples ask how much tax benefit they may get!

Here highlighting some LIC Plans with tax benefit as per Income Tax Act.

1) Deductions Under Section 80C  
   
    (i) Life insurance premium paid in order to effect or to keep in force an insurance policy on the life of the assessee or on the life of the spouse or any child of assesee and in the case of HUF, Premium paid on the life of any member thereof under an insurance policy, (Other than a contact for a deferred annuity) issued on or before the 31st day of March 2012 shall be eligible for "deduction only to the extent of 20% of the actual capital sum assured or actual  premium paid whichever is less." 
   And issued on or after the 1st day of April 2012 shall be eligible for "deduction only to the extent of 10% of the actual capital Sum Assured or Actual Premium paid  whichever is less".
     Where the policy, issued on or after the 1st day of April 2013, is for insurance on life of any person, who is - 
     (a)a person with disability or a person with sever disability (Section 80U)
     (b) Suffering from disease or ailment as specified in the rules under section              80DDB.

   (ii) Contribution to deferred annuity plans in order to effect or to keep in force a contract for deferred annuity, on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for deduction.

  (iii) Contribution to Annuity Plans like - New Jeevan Dhara, New Jeevan Dhara -I and Jeevan Akshaya -VI.


Under Section 80CCC
 New Jeevan Nidhi Plan & New Jeevan Suraksha - I Plan :- A deduction to an individual for any amount paid or deposited by him from his taxable income in the above annuity plans for receiving pension is allowed.

*The aggregate amount of deductions under U/S 80C, 80CCC & 80CCD (1) shall not in any case exceed Rs.1,50,000/- (Rupees One Lakh Fifty Thousand)*

2) Deductions Under Section 80D

a)    Deduction allowable upto Rs.25,000/- if an amount is paid to keep in force an insurance on health of assessee or his family (i.e Spouse & Dependent children) or any contribution made to the central Government Health Scheme or such other scheme as may be notified by the Central Government in this behalf or on account of Preventive health check-up of the assessee or his family.
b)    Additional deduction upto Rs.25,000/- if an amount is paid to deep in force an insurance on health of parents or on account of Preventive health checkup of the parent of the assessee, whether dependent or not.
(c) In case of HUF, deduction allowable upto Rs.25,000/- if an amount is paid to deep in force an insurance on health of any member of that HUF.
(d) If the sum specified in (a) or (b) or (c) is paid to effect or keep in force an insurance on the  any person specified therein who is a senior citizen, then the deduction available will be up to Rs.30,000/-. Here senior citizen means the person who is of sixty year or more during the previous year.
(e) In case the amount are paid in (a) or (b) or (c) on account of preventive health check up, the deduction for such amounts shall be allowed to the extent it does not exceed in aggregate Rs.5,000/-
(f) For the purpose of deduction, the payment shall be made by  - any mode, including cash, In respect of any sum paid on account of preventive health check up and Any mode other than cash in all other cases.
(g) the insurance as mentioned above shall be in accordance with the scheme framed by (i) the GIC of India or any other insurer approved by IRDA.


3) Deductions Under Section 80DD
Jeevan Aadhar Plan - Deduction from total income upto Rs.75,000/- allowable on amount deposited with LIC under Jeevan Aadhar Plan, Jeevan Vishwas for maintenance of an handicapped dependent (Rs.1,25,000/- where handicapped dependent is suffering from severe disability)

4) Exemption in respect of commutation of Pension under Jeevan Suraksha & Jeevan Nidhi Plans : 
Under Section  10(10A)(iii) of the Income Tax Act, any payment received by way of commutation of pension out of the Jeevan Suraksha & Jeevan Nidhi Annuity Plans is exempt from Tax.

5) Income Tax Exemption on Maturity / Death Claims proceeds under section 10(10D) :
As per Section 10(10D) of the 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 where the sum s received as a death benefit. However, to get exemption under above section for sum received other than death benefit.
* Policy shall not be issued under Section 80DD(3)  Or
* Policy shall not be issued as Keyman Insurance Policy  Or
* Policy which has been issued on or after April 1, 2003 and the premium paid      in any of the years during the term of the policy not exceeding 20% of the          Actual Capital Sum Assured.
* Policy which has been issued on or after April 1, 2012 and the premium paid      in any of the years during the term of the policy not exceeding 10% of the          Actual Capital Sum Assured.

Where the policy issued on or after the 1st day of April 2013 is for insurance on life of any person, who is - 
(i) a person with disability or a person with severe disability as referred to in section 80U, or 
(ii) Suffering from disease or ailment as specified in the rules made under section 80DDB,


*Exemption under this section shall be available only if the premium payable in any of the years is not more than 15% of the actual Capital Sum Assured.*


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Below are the direct codes for banks::

* 99* 41# -State Bank of India
* 99* 42# -Punjab National Bank
* 99* 43# -HDFC Bank
* 99* 44# -ICICI Bank
* 99* 45# -AXIS Bank
* 99* 46# -Canara Bank
* 99* 47# -Bank Of India
* 99* 48# -Bank of Baroda
* 99* 49# -IDBI Bank
* 99* 50# -Union Bank of India
* 99* 51# -Central Bank of India
* 99* 52# -India Overseas Bank
* 99* 53# -Oriental Bank of Commerce
* 99* 54# -Allahabad Bank
* 99* 55# -Syndicate Bank
* 99* 56# -UCO Bank
* 99* 57# -Corporation Bank
* 99* 58# -Indian Bank
* 99* 59# -Andhra Bank
* 99* 60# -State Bank Of Hyderabad
* 99* 61# -Bank of Maharashtra
* 99* 62# -State Bank of Patiala
* 99* 63# -United Bank of India
* 99* 64# -Vijaya Bank
* 99* 65# -Dena Bank
* 99* 66# -Yes Bank
* 99* 67# -State Bank of Travancore
* 99* 68# -Kotak Mahindra Bank
* 99* 69# -IndusInd Bank
* 99* 70# -State Bank of Bikaner and Jaipur
* 99* 71# -Punjab and Sind Bank
* 99* 72# -Federal Bank
* 99* 73# -State Bank of Mysore
* 99* 74# -South Indian Bank
* 99* 75# -Karur Vysya Bank
* 99* 76# -Karnataka Bank
* 99* 77# -Tamilnad Mercantile Bank
* 99* 78# -DCB Bank
* 99* 79# -Ratnakar Bank
* 99* 80# -Nainital Bank
* 99* 81# -Janata Sahakari Bank
* 99* 82# -Mehsana Urban Co-Operative Bank
* 99* 83# -NKGSB Bank
* 99* 84# -Saraswat Bank
* 99* 85# -Apna Sahakari Bank
* 99* 86# -Bhartiya Mahila Bank
* 99* 87# -Abhyudaya Co-Operative Bank
* 99* 88# -Punjab & Maharashtra Co-operative Bank
* 99* 89# -Hasti Co-Operative Bank
* 99* 90# -Gujarat State Co-Operative Bank
* 99* 91# -Kalupur Commercial Co-Operative Bank





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Know-What is ULIP ???

Know-What-is-ULIP-HistoryA Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that unlike a pure insurance policy gives investors the benefits of both insurance and investment under a single integrated plan. Unit Linked Plans refer to Unit Linked Insurance Plans offered by insurance companies. These plans allow investors to direct part of their premiums into different types of funds (Equity, Debt, Money market, Hybrid etc.)

History:-

The first ULIP was launched in India in 1971 by Unit Trust of India (UTI) with the Government of India opening up the insurance sector to foreign investors in 2001 and the subsequent issue of major guidelines for ULIPs by the Insurance Regulatory and Development Authority (IRDA) in 2005, several insurance companies forayed into the ULIP business leading to an over abundance of ULIP schemes being launched to serve the investment needs of those looking to invest in an investment cum insurance product.

Working Principle:-
 A ULIP is basically a combination of insurance as well as investment. A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity & debt schemes. The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in various markets instruments  (debt & equity) in varying proportions just the way it done for mutual funds. Policy holders have the option of selecting the type of funds or a mix of both (debt and equity) based on their investment need and appetite. Just the way it is for mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the value based on which the net rate of returns on ULIPs are determined. The NAV varies from one ULIP to another based on market conditions and the fund’s performance.

Features:-
ULIP policy holders can make use of features such as top-up facilities, switching between various funds during the tenure of the policy, reduce or increase the level of protection, options to surrender, additional riders to enhance coverage and returns as well as tax benefits.

Types:-
There are variety of ULIP plans to choose from based on the investment objectives of the investor, his risk appetite as well as the investment horizon. Some ULIPs play it safe by allocating a larger portion of the invested capital in debt instruments while others purely invest in equity. Again, all this is totally based on the type of ULIP chosen for investment and the investor preference and risk appetite.

Charges:-
Unlike traditional insurance policies, ULIP schemes have a list of applicable charges that are deducted from the payable premium. The notable ones include policy administration charges, premium allocation charges, fund switching charges, mortality charges and policy surrender or withdrawal charge. Some insurer also charge “Guarantee Charge" as a percentage of Fund Value for built in minimum guarantee under the policy.

Risks: -
Since ULIP returns are directly linked to market performance and the investment risk in investment portfolio is borne entirely by the policy holder, one need to thoroughly understand the risks involved and one's own risk absorption capacity before deciding to invest in ULIPs.

Providers: -
There are several public and private sector insurance providers that either operate solo or have partnered with foreign insurance companies to sell nit linked insurance plans in India. The public insurance providers include LIC of India, SBI Life and Canara Life while some of the private insurance providers include ICICI Prudential, HDFC Life, Bajaj Allianz, Aviva Life Insurance & Kotak Mahindra Life.

Advantages: -
(1) ULIP has limited liquidity. One needs to stay invested for a minimum   period of time as specified in the policy before redeeming the units.

(2) ULIP gives you flexibility to invest as per your risk profile, financial commitments and convenience. You can choose to invest either in equity or in debt or in hybrid fund and even change your investment    strategy. Unit Linked Plans offer you a wide range of flexible options such as   -- 
        (a)  The option to switch between investment funds to match your changing needs.
       (b) The facility to partially withdraw from your fund, subject to charges and conditions.
       (c) Single premium additions to enable the policy holder to invest additional sums of money (Over and above the regular premium) as and when desired, subject to conditions.

(3) Market Linked Returns:  ULIP give you an opportunity to earn market- linked returns as part of the premiums are invested in market linked funds which invest in different market instruments including debt instruments and equity in varying proportions.

(4) Life Protection, Investment and Savings: ULIP offer the twin benefits of life insurance and savings at market-linked returns. Thus you have     the opportunity to invest you money to earn higher returns, while     taking care of your protection needs. Investing in unit linked plans    helps to inculcate a regular habit of saving and investing. Which is important for building wealth over the long term?


(5)  All ULIPs offer Tax benefits under section 80C upto a maximum of Rs.1,50,000/-




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