Direct Tax Code Highlights & Key Features

Direct Tax Code (DTC) Highlights and Key Features

Under DTC, there are several important key changes have made. The commonest are,

- Deductions under Section 80C

- Deductions of LIC Premium

- Tax Free Investments

- Tax on Maturity Proceeds

To know more in detail about each and every deductions, visit Economic Times: DTC implications for Policy Holders and Companies.

The most undesirable change will be,

DTC provides that proceeds on maturity of life insurance policies (in cases other than the death of the policyholder) will be taxable in the policyholder’s hands. The exception, however, is in the case of polices where the premium paid does not exceed 5 per cent of the sum assured or the insurer has paid distribution tax.
In such cases, the life insurance company would have to withhold tax at specified rates from these proceeds being paid to policy holders. In the case the policy holder is an individual or has HUF status the tax withheld will be at the rate of 10 per cent, in the case of any other deductee, the withholding would be at the rate of 20 per cent, where payment exceeds ‘10,000.

Yup…If you will survive than you will have to pay 20% tax on your life insurance proceedings which is really a heavy taxation.

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