Indian Union Budget 2021-22: The Institute of Chartered Accountants of India has proposed that the tax implications on pension policies sold by insurance coverage organizations and the New Pension Scheme (NPS) of the government need to not be distinctive.
Currently, there is a disparity involving the pension schemes supplied by the Life Insurance organizations and the NPS, which is supplied by the Government. “Pension policies & NPS both are similar products and therefore tax implications on these products should not make them different products,” ICAI stated in its Pre-Budget Memorandum.
To get rid of the disparity, the ICAI has recommended the government to provide for an enhanced deduction limit for the premium paid on pension policy below Section 80CCC study with Section 80CCE.
The ICAI recommended the following approaches in which the enhanced limit may well be offered:
- Additional deduction for Rs 50,000 for premium paid for pension policy issued by the Life insurance coverage organizations equivalent to that offered in section 80CCD(1B) of the Income Tax Act 1961.
- Additional deduction below section 80CCC to the extent of 14% by Central Government/10% of salary equivalent to section 80CCD(2) of the Income Tax Act 1961.
- Above limits may well be in addition to the current limit.
- Similar to section 80CCD(5), the uncommuted portion (normally 2/3rd) below a pension policy, which is mandatorily utilized to invest in an annuity strategy, need to be treated as not obtaining been received and therefore, not taxable.
- 60% Maturity proceeds exemption as offered in section 10(12A) of the Act.
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Additional Deduction Under NPS
Under NPS, an more deduction for investment up to Rs.50,000 has been offered below section 80CCD(1B) of the Income Tax Act, 1961 to each salaried and self-employed people. This more deduction is more than and above the ceiling of Rs.1,50,000.
If the above measures recommended by ICAI are implemented, tax implications for contribution to NPS and other pension policies of insurance coverage organizations will turn into equivalent.
Deduction for property, private accident cover
The ICAI has also recommended the government to provide a separate deduction to the policyholders for payments relating to travel insurance coverage, property insurance coverage or private accident insurance coverage.
At present, deduction below Section 80C is readily available for Life Insurance Policy and deduction below Section 80D is readily available for wellness insurance coverage premiums.
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“Deduction for insurance premium relating to travel, home etc. will boost the policyholders to secure their assets like car, home, etc. and also to avail personal accident cover,”
- the ICAI stated in its Pre-Budget Memorandum.