Tax exemptions under Section 10 of the Income Tax Act-1961 can be confusing. With many specific rules, it's easy to make mistakes and miss out on savings. This is especially true for salaried individuals.
The blog will simplify these key exemptions. We will exclusively cover life insurance benefits, which are covered in subsection 10D of the income tax rule. Keep reading to learn how to maximise your tax benefits.
Section 10 specifies various non-taxable incomes. This provision helps lower tax liability, especially for salaried individuals.
Moreover, these exclusions aim to promote particular activities and ease financial strain. They support savings, investments, and other specific purposes. Consequently, individuals must claim these benefits when submitting their returns.
Different types of earnings fall under these exemptions. These are not added to the annual income total. Therefore, using Section 10 wisely can result in significant tax relief. Understanding applicable exclusions ensures compliance and maximises advantages. Thus, staying updated on these rules is important for all taxpayers .
Here is a concise summary of key exemptions:
Section
Exemption Type
Description
Earnings from agriculture, rent from agricultural land, and sales of agricultural products.
Hindu Undivided Family
Income received by a member from the HUF's estate.
Partner's share of profit from a partnership firm, subject to conditions.
Interest on specified securities and bonds, NRE(Non-resident external) account deposits.
Leave Travel Concession- LTC
Travel expenses for employees and their families within India.
Income of foreign diplomats and representatives in India.
Government employees abroad
Allowances for Indian government employees working abroad.
Other perks provided by the employer, already taxed at the employer's end.
Compensation received on voluntary retirement, subject to conditions.
Maturity amount and bonus from life insurance policies, subject to conditions.
Interest and maturity amounts from Provident Fund and Sukanya Samriddhi Scheme.
Government assistance for damages due to natural disasters or human-caused events.
House Rent Allowance or HRA
Actual HRA received or rent paid minus 10% of salary, subject to conditions.
Various allowances like conveyance, uniform, research, and travel allowances.
Interest from specified investments like bonds, securities, and savings certificates.
Section 10(10D) defines conditions for tax-exempt payouts from life insurance policies.
First and foremost, proceeds from the cover (bonus included) are generally exempt from taxation . However, this exemption is subject to certain conditions.
Let's look at the premium thresholds:
In addition, there are special cases to note:
Moreover, 10(10D) income tax states that sums received upon the policyholder’s death are fully exempt from tax, regardless of the premium amounts paid. By doing this, it guarantees that beneficiaries receive the desired level of financial support free from taxes.
Provisions which are taken by employers on the lives of their employees, do not qualify for tax exemption under Sec 10 (10D).
Exemption Type
Issued On or After
Tax-free if premium
Fully tax-free for the nominee.
? 20% of sum assured.
? 10% of sum assured.
? 15% of sum assured.
February 1 2021
To enjoy the exemptions make sure your policy maturity payout meets specific conditions.
These conditions ensure tax-exempt status for life insurance payouts, promoting compliance and financial security.
To be eligible for 10(10D) benefits under this provision several specific criteria must be met:
Section 10(10D) offers significant tax advantages for life insurance policies. To benefit, stay vigilant. Regularly check your policy’s performance. Understand the fine print. Use withdrawals wisely. By taking this strategy, you can protect your fiscal well-being and make the most out of your coverage.
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1. How is exemption under section 10 calculated?
Section 10 has different exemptions, each with its own rules. For example, Section 10(10D) covers life insurance policies. If your cover is from April 2003 - March 2012, you cannot claim an exemption if the annual premium is over 20% of the sum assured. For policies issued thereon, the premium must be 10% or less of the sum assured to get the exemption. Understanding these rules helps you know what you can claim. Always check the specific conditions for your situation. It makes a big difference in your tax benefits.
2. Can I claim HRA without a rent receipt?
No, you cannot. For monthly rent over INR 3,000, submitting rent receipts is necessary. Employers need these receipts to process your HRA claim. Without them, you lose the exemption. Always keep rent receipts safe to ensure your HRA benefits are granted.
3. What is the maximum HRA claim?
To determine the highest HRA exemption, compare these values:
The lowest amount among these three is your exemption.
References:
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