Now to pension plans; which are basically
tools for retirement planning. Policyholders make contributions over a period of time (or even a one-time contribution) to form a corpus. This corpus is used to generate regular income for policy holders from the retirement age. The pension plans are flexible, whereby income can be received either for a fixed tenure or till death. In the majority of cases, investors avail of tax rebates under section 88 in the range of 15 % to 30% of the premium paid during the year depending on the total income. Tax benefits are also offered when medical riders are added to the policy as per section 80 D.
Looking at taxation of returns, thankfully, the maturity proceeds (either claims or at the term end) of all insurance policies including bonuses are entirely tax-free. But single premium policies are exceptions whereby the proceeds on maturity cannot avail of any tax benefits as they are charged as capital gains tax. At the same time, while contributions to pension funds are deductible from gross total income, the proceeds from the scheme are fully taxable as income from other sources. Pension schemes differ from insurance products as far as taxability of returns is concerned.
Of late, one amongst the most prized attractions for investors are the ULIPs. They are not only an important source for saving on tax and covering risk, but also aim to match the equity market returns. Explains Amit Saxena, CEO, Planman Financial, “The money paid towards ULIPs is partly spent on the purchase of units of the plan, and the balance is allocated towards the insurance premium.” Your premiums are invested in a mutual fund type of investment instrument. Some plans additionally guarantee the capital invested in the form of premiums paid, reducing the risk associated usually with other forms of equity related investments. Even these investments are eligible for tax break under Section 80C of the Income Tax Act. The maximum eligible amount of investment under Section 80C is Rs.100,000. Under Section 10(10D) of the IT Act, even the maturity proceeds are tax-free. On another front, the Life Insurance Council, in order to encourage log term savings, has also sought exemptions on infrastructure bonds in ULIPs as they are directly channeled for infrastructure developments.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
tools for retirement planning. Policyholders make contributions over a period of time (or even a one-time contribution) to form a corpus. This corpus is used to generate regular income for policy holders from the retirement age. The pension plans are flexible, whereby income can be received either for a fixed tenure or till death. In the majority of cases, investors avail of tax rebates under section 88 in the range of 15 % to 30% of the premium paid during the year depending on the total income. Tax benefits are also offered when medical riders are added to the policy as per section 80 D.Looking at taxation of returns, thankfully, the maturity proceeds (either claims or at the term end) of all insurance policies including bonuses are entirely tax-free. But single premium policies are exceptions whereby the proceeds on maturity cannot avail of any tax benefits as they are charged as capital gains tax. At the same time, while contributions to pension funds are deductible from gross total income, the proceeds from the scheme are fully taxable as income from other sources. Pension schemes differ from insurance products as far as taxability of returns is concerned.
Of late, one amongst the most prized attractions for investors are the ULIPs. They are not only an important source for saving on tax and covering risk, but also aim to match the equity market returns. Explains Amit Saxena, CEO, Planman Financial, “The money paid towards ULIPs is partly spent on the purchase of units of the plan, and the balance is allocated towards the insurance premium.” Your premiums are invested in a mutual fund type of investment instrument. Some plans additionally guarantee the capital invested in the form of premiums paid, reducing the risk associated usually with other forms of equity related investments. Even these investments are eligible for tax break under Section 80C of the Income Tax Act. The maximum eligible amount of investment under Section 80C is Rs.100,000. Under Section 10(10D) of the IT Act, even the maturity proceeds are tax-free. On another front, the Life Insurance Council, in order to encourage log term savings, has also sought exemptions on infrastructure bonds in ULIPs as they are directly channeled for infrastructure developments.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
