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Tax on term life insurance may be exempted by GST Council

Tax on term life insurance may be exempted by GST Council

Term life insurance is a pure protection plan that offers financial security to the beneficiaries in case of the policyholder’s death during the term of the policy. The insurance provides coverage for a specified period ranging from 10 to 30 years.

The GST Council is likely to exempt term life insurance policies from the goods and services tax (GST). Although, it may continue to tax insurance policies with an investment component. The decision is likely to be formalised in the GST Council meeting on September 9.

The proposed exemption of tax on term life insurance by the GST Council could be a significant development for consumers. This could potentially lead to:

Lower Premiums: With a reduction in taxes, insurance companies might be able to offer lower premiums to customers.
Increased Affordability: This could make term life insurance more accessible to a wider range of people.
Enhanced Financial Protection: Lower premiums might encourage more individuals to consider term life insurance as a means of protecting their loved ones.

GST Council may exempt term life insurance from GST, formal decision expected on September 9, 2024.

Disclaimer: Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.

Changes in big income tax rules! see list

There are many changes in the income tax rules effective from this financial year. Changes in income tax slabs to tax rebate limit raised, No LTCG tax benefit on some debt mutual funds are some of the major changes effective from 1 April 2023.

1) New income tax regime to be default regime

Starting, 1 April 2023, the new income tax regime will act as the default tax regime. Tax assessors will still be able to choose from the prior regime. Salaried and pensioners: the new system’s standard deduction for taxable income exceeding Rs.15.5 lakhs is ₹52,500. The government in Budget 2020-21 brought in an optional income tax regime, under which individuals and Hindu Undivided Families (HUFs) were to be taxed at lower rates if they did not avail specified exemptions and deductions, like house rent allowance (HRA), interest on home loan, investments made under Section 80C, 80D and 80CCD. Under this, total income up to ₹2.5 lakh was tax exempt.

2) Tax rebate limit raised to ₹7 lakh

The enhancement of tax rebate limit to ₹7 lakh from ₹5 lakh means that the person whose income is less than ₹7 lakh need not invest anything to claim exemptions and the entire income would be tax-free irrespective of the quantum of investment made by such an individual.

3) Standard deduction

There is no change in standard deduction of ₹50000 provided to employees under old tax regime. For pensioners, the finance minister announced extending the benefit of standard deduction to new tax regime. Each salaried person with an income of ₹15.5 lakh or more will benefit by ₹52,500.

4) Changes in Income Tax slabs

The new tax rates are

0-3 lakh – nil

3-6 lakh – 5%

6-9 lakh- 10%

9-12 lakh – 15%

12-15 lakh – 20%

above 15 lakh- 30%

5) LTA

The leave encashment for non government employees is exempt up to a certain limit. This limit was ₹3 lakh since 2002 and is now increased to ₹25 lakh

6) No LTCG tax benefit on these Mutual Funds

From April 1, investments in debt mutual funds will be taxed as short-term capital gains. The move would strip investors of the long term tax benefits that had made such investments popular.

7) Market Linked Debentures (MLDs)

Also, investment in Market Linked Debentures (MLDs) post April 1 will be short term capital assets. With this, grandfathering of earlier investments will end and the impact on the mutual fund industry will be slightly negative.

8) Life Insurance policies

Proceeds from life insurance premium over the annual premium of ₹5 lakh would be taxable from new financial year i.e. from 1st April 2023. Finance Minister Nirmala Sitharaman, while presenting Budget 2023, aslo announced that the new income tax rule won’t be applicable on ULIP (Unit Linked Insurance Plan).

9) Benefits to Senior Citizens

The maximum deposit limit for senior citizen savings scheme will be increased to ₹30 lakhs from ₹15 lakhs.

The maximum deposit limit for monthly income scheme will be increased to ₹9 lakhs from 4.5 lakhs for single accounts and ₹15 lakhs from ₹7.5 lakhs for joint accounts.

10) Physical gold conversion to e-gold receipt not to attract capital gains tax

While presenting Budget 2023, Sitharaman said there will not be any capital gain tax if physical gold is converted to an Electronic Gold Receipt (EGR) and vice versa. This will be effective from 1 April 2023.

To Save Tax, Make Investment Strategy Like This At Last Moment

You can save tax by investing here

ELSS: Equity Linked Savings Scheme (ELSS) is also known as Tax Saving Mutual Fund. You can invest in it through fund houses. On this one can save tax up to 1.50 lakh annually under section 80C of Income Tax Act. But, next time you should consider investing in Systematic Investment Plan (SIP). It gives better returns along with tax savings.

Health Insurance: You can claim tax exemption up to Rs 25,000 on health insurance premiums under 80D. One can get an additional discount of up to Rs 25,000 on health insurance if the parents are within 60 years of age. If the age of the parents is above 60 years, then you can claim additional exemption up to Rs. 50,000.

Life Insurance: One can save tax up to Rs 1.50 lakh on premium of life insurance under section 80C of Income Tax Act. It helps in meeting the financial needs of the family after you.

Bank FD of five years: This is also a good option to save tax. For this you can open FD account in any bank or post office.

Insurance Policies from 40+ Companies at One Place. Check Plans Here

With Tax Concept, you can take insurance plans from 40+ companies at one place.

You just need to send an email at dhanraj@taxconcept.net with your full name, mobile number, date of birth (DOB) and the nature of policy you want to take (eg. Life Insurance/ Motor Insurance etc.)

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You just need to approve the plan and to give required details to complete the process.

Best plan of LIC:

Insurance Ombudsman Rules Amended for Better Resolution of Policyholders’ Complaints Regarding Insurance Service Deficiencies

The Government on 2^nd March 2021 notified comprehensive amendments to the Insurance Ombudsman Rules, 2017, with a view to improve the working of the Insurance Ombudsman mechanism to facilitate resolution of complaints regarding deficiencies in insurance services in a timely, cost-effective and impartial manner.

The amended rules have enlarged the scope of complaints to Ombudsmen from only disputes earlier to deficiencies in service on the part of insurers, agents, brokers and other intermediaries. Further, insurance brokers have been brought within the ambit of the Ombudsman mechanism, by empowering the Ombudsmen to pass awards against insurance brokers as well.

Under the amended rules, the timeliness and cost-effectiveness of the mechanism has been substantially strengthened. Policyholders will now be enabled for making complaints electronically to the Ombudsman and a complaints management system will be created to enable policyholders to track the status of their complaints online. Further, the Ombudsman may use video-conferencing for hearings. To enable access to relief through the Ombudsman mechanism even when there is vacancy in the office of a particular Ombudsman, provision has been made for giving additional charge to another Ombudsman, pending the filling of the vacancy.

A number of amendments have been made for securing the independence and integrity of the Ombudsman selection process, while also building in safeguards to secure the independence and impartiality of the appointed persons while serving as Ombudsmen. Further, the selection committee will now include an individual with a track record of promoting consumer rights or advancing the cause of consumer protection in the insurance sector.

The Ombudsman mechanism was administered by the Executive Council of Insurers, which has been renamed as the Council for Insurance Ombudsmen.

Click here to view Official Gazette Notification.

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Tag: LIFE INSURANCE