Worried about Corona virus spreading in India? Buy Health Insurance and get coverage now. View Plans
Take informed decisions with IIFL Insurance:

Do you have adequate knowledge about TDS on Post Office Schemes

What is TDS, and where does it fit in insurance policies – 

TDS (tax deducted from source) is a direct tax paid to the bank, which delivers it directly to the government. A certificate confirming the proper payment of tax is issued for the deductor and the deductee. Usually, companies that hire services or make purchases follow TDS when making payments for their purchase or employment. 

The person paying becomes the deductor who deduces the tax amount from the total payment and delivers it directly to the government. And the personnel who is on the receiving end of the price becomes the deductee.

All the tax amounts due are paid at individual transactions instead of being piled up to be paid overall. Most companies follow TDS as frequently and as segmented as possible to maintain a no-due tax streak. TDS also helps avoid the last-minute hassles of paying lump amounts of tax. 

How does TDS work, and where is it applicable –  

Under section 80C of the income tax act, even the premium payments made for insurance policies are subject to a tax deduction. Every premium payment for all types of insurance policies that have been approved by the IRDAI (Insurance Regulatory and Development Authority of India) is eligible for deduction. There are specifications as to when the conclusion can be claimed. All premium amounts that are more than 15% of the sum assured are found eligible for taxation. The sum assured is the minimum amount that the insurance company has promised to the policyholder. TDS is also deducted from bonus payments. All payments made by the insurance company to the policyholder are eligible and processed for TDS.

The credit for TDS can be claimed in the income tax return. The insurer/insurance company deals with the payment of TDS before completing the transaction to the policyholder. Multiple instances qualify for exemption as well. The deductee who is the policyholder, in this case, will have to state the deductions and payments received from an insurance company under the ‘income from other sources’ heading in their tax return sheet. The due date for tax payment for the commission for insurance agents is usually carried on till the 7th of the consecutive month. 

As the deductor/insurance company makes the payment for TDS, the certificate containing the commission payments and the summary of the insurance amount and tax deducted is issued to the deductee/policyholder. 

The TDS rates are 5% for insurance commissions. If the OAN (Personal Account Number) is not provided, taxation increases to 20%. The TDS for everything other than individuals is 10%, even when the PAN is provided. And TDS is exempted for commissions below Rs. 15,000. 

UNDERSTANDING POST OFFICE SCHEMES 

The PLI (Postal Life Insurance) scheme started as a welfare initiative for postal employees in 1884. It has now extended its availability to state and central government employees, covering universities, educational institutions, local bodies, defense sectors, paramilitary forces, nationalized banks, joint ventures, and more. Postal life insurance was the first insurance scheme in India to extend its utility to women. What started with a few 100 policies in 1884 is now running with more than 46 lakhs policies for the more significant benefit of the people. These post office schemes were initially only administered offline, but with the ascent of digitalization, the documentation and procedures of the post office schemes can be carried out online. The status of your post office interest ratepost office premium payments, other data, and procedures can be clarified via email too.

BENEFITS OF POST OFFICE SCHEMES 

The PLI (postal life insurance) schemes are an inclusive initiative to enable financial protection for its citizens and employees. Since it is mainly focused on the welfare of the people, it comes with several perks, some of which are:

  • Financially sound – post office schemes’ interest rates are low and have higher returns on premium payments. 
  • Nomination facilities – the policyholder has the option to nominate a beneficiary.
  • Coverage extension options – the insured can extend post office scheme coverage to next of kin (spouse) who need not be government employees.
  • Security – coverage is offered to ex-employees too, which means that even if you quit your job, the benefits of the post office schemes are continued even after the employee resigns or retires. 
  • Policy revival – for policies that have been effective for longer than three years, the policyholder can revive any lapses in their post office scheme lapses.
  • Tax exemption – under sec.88 of the income tax act, tax exemption is applicable for post office schemes
  • Loan options – the insured can use their policy upon attaining a designated maturity period to pledge for loans.
  • Discounts – if the premium has been paid in advance of 6 months or 12 months, discounts on the premium wroth 1% and 2% respectively are applicable.
  • Policy conversion – the policyholder has the eligibility to convert their policy from one post office scheme to another.
  • Duplicate document – a duplicate copy of the policy is issued in case of any mishaps with the original document. 
  • Policy transfer – the insured can transfer their policy to any other place in India without additional charges.
  • More straightforward claims- making, processing, and authorizing claims is much simpler and quicker than other insurance policies.
  • Comfortable premium options – the premium payment for post office schemes can be made on any working day and can be opted to be paid on a monthly, half-yearly, or annual basis. There are discounts on half-yearly and yearly premium payments. 

 

TYPES OF POST OFFICE SCHEMES 

Some several plans and policies come under the post office schemes. Based on your lifestyle and responsibilities, several options would specifically serve your purpose. Some of the top post office schemes are as follows: 

1. Whole life assurance / SURAKSHA – 

The insured sum is issued to the policyholder when they reach the age of 80 or to their legal heir or nominee upon their death. Loan facilities are open once the policy has passed the four years mark. It can be surrendered only after attaining a three-year mark. 

  • Applicable age limit – 19 to 55 years
  • Assured sum (minimum/maximum) – Rs. 20,000 to Rs. 50,00,000

 

2. Endowment assurance / SANTOSH –  

This policy allows the insured sum and its accredited bonus to be issued to the policyholder when they reach a pre-decided age of maturity. In case of their demise, the insured sum and accredited bonus are given to the legal heir or nominee. The loan facilities and surrender option are open after the policy reaches a three-year mark.  

  • Applicable age limit – 19 to 55 years
  • Assured sum (minimum/maximum) – Rs. 20,000 t0 Rs. 50,00,000

 

3. Convertible whole life assurance / SUVIDHA – 

As the name suggests, this policy can be converted into SURAKSHA policy after passing the minimum mark of 5 years. Like the SURAKSHA plan, the loan facilities are available after the four-year mark, while surrendering options can be taken up after three years. 

  • Applicable age limit – 19 to 50 years 
  • Assured sum (minimum/maximum) – Rs. 20,000 to Rs. 50,00,000

 

4. Anticipated endowment assurance / SUMANGAL – 

This policy is opted by people who need periodical returns as it offers periodical payments for survival benefits. The policy is completed upon the insured’s death, where the promised sum and bonus are issued to the nominee or legal heir as one sum and not as periodical returns. 

  • Policy term – 15 to 20 years 
  • Applicable age limit – 19 to 40 years (20 years period) / 19 50 45 years (15 years period)

 

5. Joint life insurance / YUGAL SURAKSHA – 

This is an extension of the policy’s benefits to the employees’ spouses. Life covers are issued for both the policyholder and their spouse documented in this policy. In case of death of either of the spouses, the benefits and some are delivered to the spouse that remains. 

  • Applicable age limit of a spouse – 21 to 45 years  
  • Assured sum (minimum/maximum) – Rs. 20,000 to Rs. 50,00,000

 

6. Children policy / BAL JEEVAN BEEMA –

This is an extension policy where benefits are delivered to the children of the policyholder. Any parent employee whose age does not exceed 45 years and whose children’s age is between 5 and 20 years is eligible to make claims on this policy. A maximum of 2 children can be accommodated in this policy.

  • Eligible age limit of children – 5 to 20 years 
  • Applicable age limit of policyholder – maximum 45 years. 

Buy Insurance - 18002101330