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Oct 02, 2012

Taxpayers May Get Relief In Excess of Rs 1 lakh

image Individuals may get tax relief over Rs 1 lakh for investments made in various saving instruments, according to new recommendations made to the Finance Ministry.

“The Department of Revenue will examine whether, in addition to NPS, some insurance products as approved by IRDA may be included in the separate limit over and above the limit of Rs 1 lakh under Section 80(C) of the Income-Tax Act for the purpose of income-tax deduction on the premium paid," Finance Minister P. Chidamabaram said on Monday. NPS is the New Pension Scheme.

The Central Board of Direct Taxes is exploring whether existing life-insurance policies can be ‘grandfathered’ whenever changes are made to direct tax laws so that the changes apply only to policies prospectively.

Grandfathering would mean tax provisions for existing policies will remain unchanged, while those for new policies will be based on new rules.

Among other matters under the consideration of the ministry is allowing banks to sell products of more than one insurance company. Further, a reduction in service tax on first year regular premium as well as single premium policies is also considered.

Service tax exemptions are also considered for the first year premium and subsequent premiums of social security insurance schemes such as Janashri Bima Yojana (JBY) and Aam Aadmi Bima Yojana (AABY) as well as micro insurance policies.

The Department of Revenue and the CBDT/Central Board of Excise and Customs have been asked to complete the examination of these suggestions by October 10. The ministry plans to announce appropriate decisions thereafter.