Employeeâs contribution â Section 80CCD (1) Allowed to an Individual who makes deposits to his/her Pension account. Maximum deduction allowed is 10% of salary (in case of taxpayer being an employee) or 10% of gross total income (in case of tax payer being self-employed) or Rs 1, 50,000 whichever less is.
This applies to current, former and retired employees. Premiums you pay for employees' group life insurance that is not group term insurance or optional dependent life insurance are also a taxable benefit.
Exception #1 â Taxing Interest Gained On Life Insurance Pay-Outs. Life insurance can be paid as annual payouts instead of a lump sum. In this situation, some life insurance companies will pay interest to you while they are holding the balance of the death benefit pay-out. Interest is considered to be income by the IRS anytime it is earned. If you gain any interest on the payout of your life insurance, this amount is taxable.