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All about Tax Benefits on Life Insurance - Greyfont


All about Tax Benefits on Life Insurance

 

A Life insurance Policy is one tool that can help you save taxes under section 80C of the Income Tax Act, 1961. Similarly, you can also avail tax benefits on the returns under section 10(10D) of the Income Tax Act, 1961. Read below to understand all about tax benefits on life insurance in detail.

 

Tax Deductions under Section 80C:

  • The premiums paid for life insurance policy is deductible under section 80C of The Income Tax Act.
  • Maximum deduction of Rs. 1, 50,000 can be exempted from taxation under section 80 C, 80 CC and 80CCE of the income tax act.
  • This deduction can be claimed for life insurance policy purchased for self, spouse and kids.
  • Deduction is available for Hindu undivided families
  • If the policy is issued before 31st March 2012, then deduction is applicable only if the premium is not more than 20% of the sum assured.
  • If the policy is issued on or after 1st April 2012 then deduction is applicable only if the premium is not more than 100% of the sum assured.
  • If the policy is issued on the name of a disabled person or after 1st April 2013 then deductions can be claimed under section 80U or 8DDB of the income tax act. It is applicable only if the premium is not more than 15% of the sum assured.
  • Tax benefit can be reversed if the deduction claim has been made for ulip that has been annulled or terminated within 5 years of purchase.
  • It can also be reversed if the deduction claim has been made for any other life plan that has been annulled or terminated within 2 years of purchase.

 

Tax Benefits Under Section 80D

  • Section 80D allows for tax deductions on health insurance
  • If you’ve purchased a life plan with riders such as critical illness, hospital cash or any, then you’re eligible to avail the below benefits;

 

You can claim a tax deduction up to Rs. 5000 within existing limits of section 80D.

 

Note: You can only claim tax deduction on preventive health check-up if your premium paid is less than the maximum allowed limit.

 

Tax Benefits Under Section 80DD:

For family members with severe disability, tax deductions up to Rs. 1,25,000. This covers disabilities such as low vision, cerebral palsy, blindness, etc.

 

Exemptions under section 10(10D)

Sum assured received towards life insurance policy qualifies for deduction under section 10(10D)

This sum assured can be in the form of

  • Maturity benefit
  • Survival benefit
  • Death benefit
  • Survival value
  • Bonus received

 

Deductions are also applicable on gains received from ulip plans

There is no cap on maximum deduction that can be availed under this section. Deduction under this section is not applicable on pay-outs for pension plans, annuity plans or insurance policies sponsored by employers.

 

Types of life insurance policies that can help you save taxes:

  • Term Insurance-Protection plan
  • Unit Linked Insurance- Investment +Insurance
  • Endowment Plan- Savings+ Insurance
  • Money back plan-Offers periodic returns as well as life cover
  • Child plan-Helps build a strong financial future for child
  • Retirement Plan-Helps build a retirement corpus
  • Whole Life Insurance Plan-Provides coverage for whole life or 100 years

 

Conclusion:

You can buy a life insurance plan to avail tax benefits under various sections of the Income Tax Act. You can buy a life insurance policy online as they are low cost and give you an option to compare plans offered by various insurers




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