The Government of India has announced that the deadline for investing in tax-saving instruments has been pushed back to June 30 2020. The usual deadline is 31st March 2020.
With the covid-19 epidemic and the lockdown bringing the entire country to a standstill, many taxpayers, who had left the task of investing in insurance products and tax saving for the last few days of the financial year, had got stuck. As a great relief for them, the government has extended the deadline until June 30, 2020 (The usual deadline is 31st March 2020.), for people to make their tax-saving investments for the financial year 2019-20.
“This concession is being made for those who have not yet made the requisite tax savings investments. This change does not impact tax payers who have already made their tax savings investments,” says Sonu Iyer, tax partner and people advisory services leader, EY India. If you invest during, say, April, you can claim deduction for the financial year 2019-20. Of course, if you have already exhausted options and want make fresh investments in April, it can be used for the financial year 2020-21. You need to specify the relevant financial year while filing your returns. (source: moneycontrol)
So identify the best insurance products and invest now.
LIFE INSURANCE
TERM INSURANCE
If you wish to buy a pure insurance cover, go for a term plan that qualifies for a tax deduction under Section 80C. The premium you pay is allowed as deduction, subject to the overall limit of Rs 1.5 lakh.
Your annual premium for life insurance policies should not exceed 10 per cent of the sum assured. If it does, then the tax benefit will be restricted to 10 per cent of the sum assured – premium amount that exceeds this limit will not be eligible for the deduction. More importantly, if the annual premium exceeds 10 per cent of the sum assured, the maturity proceeds will not be tax-free under section 10(10D).PENSION PLANS
If you wish to buy an Annuity Plan to get pension, Section 80CCC provides a deduction to an individual for any amount paid or deposited in any annuity plan of LIC, HDFC Life, ICICI Pru Life or any other Life insurer. The plan must be for receiving a pension from a fund referred to in Section 10(23AAB). Pension received from the annuity or amount received upon surrender of the annuity, including interest or bonus accrued on the annuity, is taxable in the year of receipt. The maximum deduction that can be claimed during a financial year is Rs. 1,50,000.
HEALTH INSURANCE
You should also look to buy an independent health cover – for yourself and your family, including parents – even if you are covered under your employer’s group policy. This premium can be claimed as a deduction under section 80D.
Section 80D – Tax Exemption Limit :
You (as an individual or HUF) can claim a deduction of Rs.25,000 under section 80D on insurance for self, spouse and dependent children. An additional deduction for insurance of parents is available up to Rs 25,000, if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs 50,000, which has been increased in Budget 2018 from Rs 30,000.
In case, both taxpayer and parent(s) are 60 years or above, the maximum deduction available under this section is up to Rs.1 lakh.
Example: Mr.Raju’s age is 65 and his father’s age is 90. In this case, the maximum deduction Mr.Raju can claim under section 80D is Rs. 100,000.
Any additional investment made during the extended period can be claimed at the time of filing of Income-tax Return for FY 2019-20 and refund can be claimed for FY2019-20 if higher tax deducted at source. The tax-saving investments done in the first quarter of FY 2020-21 will be eligible for deduction either in FY 2019-20 or FY 2020-21. You have an option in which FY you want to claim deduction. But care should be taken that no double deduction across both years is claimed on the same investment.
FAQ (Source Economic times)
1. Question: If I buy medical insurance in the month of April/May/June 2020, then will the premium be eligible for deduction under section 80D for FY 2019-20 or FY 2020-21? If it is for FY 2019-20, then how will tax saving work for FY 2020-21?
Answer :Medical insurance premium paid in the month of April/May/June 2020 will be eligible for deduction under Section 80D either in FY 2019-20 or FY 2020-21. You have an option in which FY you want to claim deduction. But care should be taken that no double deduction across both years is claimed on the same insurance premium.If deduction is claimed in FY 2019-20, you will lose deduction in FY 2020-21. You will need to make additional payment in FY 2020-21 to claim full deduction.However, if a person opts for the new tax regime (sans deductions) offered for FY2020-21 then the premium paid during April to June 2020 can be claimed as deduction under section 80D only for FY2019-20 subject to the limit limit for the FY 2019-20.
2. Question: If I buy a Life Insurance Policy in May 2020 from income earned in the same month then will it qualify for claiming deduction for FY2019-20?
Answer: Yes. The Life Insurance Policy (tax saving investment) bought in May 2020 from income earned in May 2020 will qualify for claiming deduction for FY 2019-20.
3. Question: Is GST paid on Insurance Basic Premium eligible for tax deduction ?
Answer: Yes.
What should investors like you do?
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