An online income tax calculator is a simple way for insurance policyholders to calculate the tax savings instantly. Check out this post for 4 simple steps that can be followed for using an online tax calculator.
Apart from being a critical component of a financially stable life, insurance products, especially health and life insurance, come with several other benefits. For instance, policyholders are eligible for tax deductions under Section 80D and 80C of the IT Act.
One should have a clear understanding of the deductions they can claim when purchasing an insurance policy. This can now be easily done with the help of an online income tax calculator. Here are 4 simple steps for using the calculator-
1. Enter Personal Information and Income Details
To calculate your tax savings on insurance purchase, the calculator will first require you to provide your personal information, including your date of birth. This will be followed by annual income details, like basic salary, house rent allowance (HRA), other allowances, interest income, dividend, and other income.
If you are a self-employed professional or business owner, you can provide your income details in the profits from business/profession column.
2. Provide House Property Details
If you live in a rented property, you can claim HRA exemption up to the prescribed limit. Similarly, if you have purchased the property with the help of a home loan, the interest and principal component of the EMI are eligible for tax deductions under various sections of the IT Act.
You can provide details like whether house property is self-occupied or rented, whether living in a metro city, rent paid, interest on housing loan, and annual income from a let-out property for accurate calculation of tax savings on insurance purchase.
3. Enter Details of 80C and 80D Deductions
In the next step, you are required to provide details of your current 80C and 80D deductions. Apart from life insurance premiums, tuition fees, PF contribution, housing loan principal repayment, PPF contribution, etc., are eligible for 80C deductions.
Similarly, 80D deductions are available for health insurance purchased for self and family. Additional deductions are available for health insurance purchased for parents below and above 60 years. Enter the details as per their applicability to you before proceeding to the last step.
4. Provide Details of Other Deductions
In the last step, you are required to provide details of other deductions that you are currently claiming. This includes NPS contribution by employees under Section 80CCD (1B) and 80CCD (2) and deduction on interest income under Section 80TTA (applicable to taxpayers under 60 years) and 80TTB (applicable to taxpayers above 60 years).
Submit all the details, and the income tax calculator will instantly provide a summary of your annual income, investment, taxable income, and tax payable as per your current tax slab.
Insurance and Income Tax Deductions
The tax deductions available with health insurance and life insurance further amplify the importance of purchasing these insurance products. If you are about to buy insurance or have already purchased a policy, the online calculator is a simple and effective way to know your tax liabilities.
If you are yet to purchase, look for a reputed insurer that offers an extensive range of policies at competitive premiums and world-class benefits.