Life Insurance Corp's health plan may hit tax hurdle
IRDA has sought clarification from LIC on claims of tax exemption for the insurers' unit-linked health insurance policy (ULIP). Investment in ULIPs pays in long term
By TNN |
MUMBAI: The tax benefit in Life Insurance Corporation’s (LIC) first health insurance policy is being questioned by the Insurance Regulatory and Development Authority (IRDA). The insurance regulator has sought clarification from LIC on claims of tax exemption for premium paid for ‘Health Plus’, the country’s first unit-linked health insurance policy.
Speaking on the sidelines of the 10th Global Conference of Actuaries, IRDA chairman CS Rao said, “As far as taxation is concerned, we have sought some clarification. This is an issue that needs examination. We will have to discuss this with the ministry and tax authorities.” LIC officials said that they were not making any claims with respect to tax exemptions.
However, at the time of the launch, officials had said that as per Section 80D of the Income Tax Act, deduction from income would be available for premia paid for a scheme on the health of an assessee or his dependents, provided such scheme was from a company approved by IRDA, and that this scheme was a health scheme. In the past, tax breaks were available only for government-approved mediclaim schmes. But following liberalisations, this clause was substituted to include all health insurance schemes.
LIC executive director (actuarial) GN Agarwal said that the corporation had filed the product application under the regulation for health cover which are eligible for Section 80D benefits. Besides offering health insurance, even the accumulated funds are to be used for meeting medical expenses such as domicilliary treatment, he said.
The brochure for LIC’s health plans states that tax benefits are subject to the existing tax laws.
Speaking on the sidelines of the 10th Global Conference of Actuaries, IRDA chairman CS Rao said, “As far as taxation is concerned, we have sought some clarification. This is an issue that needs examination. We will have to discuss this with the ministry and tax authorities.” LIC officials said that they were not making any claims with respect to tax exemptions.
However, at the time of the launch, officials had said that as per Section 80D of the Income Tax Act, deduction from income would be available for premia paid for a scheme on the health of an assessee or his dependents, provided such scheme was from a company approved by IRDA, and that this scheme was a health scheme. In the past, tax breaks were available only for government-approved mediclaim schmes. But following liberalisations, this clause was substituted to include all health insurance schemes.
LIC executive director (actuarial) GN Agarwal said that the corporation had filed the product application under the regulation for health cover which are eligible for Section 80D benefits. Besides offering health insurance, even the accumulated funds are to be used for meeting medical expenses such as domicilliary treatment, he said.
The brochure for LIC’s health plans states that tax benefits are subject to the existing tax laws.
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Meanwhile, Reliance Life, which launched its health plan ‘Health+Wealth’ close on the heels of LIC’s ‘Health Plus’ is upfront on the tax claims. The company has said that the risk premium will be eligible for tax exemptions under Section 80D of the Income Tax Act while the rest of the premium is eligible under Section 80C.
Whether the premium qualifies for Section 80C or 80D makes all the difference. For most taxpayers, there is little or no headroom to make further investments under Section 80C. This is because the section bunches all investments under an overall limit of Rs 1 lakh.
This includes employee contribution to PF, PPF, long-term bank deposits, life insurance, ELSS, and housing loan principal. On the other hand, section 80D is almost never fully utilised since the average premium is less than Rs 6,000 while tax breaks are available up to Rs 15,000.
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