Everything You Need to Know About Life Insurance Policy Tax Benefits
Table of Contents
Life insurance policies are useful tax planning tools, because the policyholder is eligible for tax benefits under the Income Tax Act (1961). There are multiple modes for saving tax, but life insurance is one of the most effective tax planning instruments.
How To Save Income Tax With Life Insurance Plans?
Under the Income Tax Act (1961), you can save tax on your hard earned money by using our Life Insurance products and solutions. You can get tax advantages at different stages of the policy.
Stage 1: Entry Advantage – You receive tax benefits on your premium payments under Section 80C (life insurance), 80CCC (pension) and Section 80D (health)
Stage 2: Earnings Advantage – Your investment with us gets the potential to grow and is not currently taxable~
Stage 3: Exclusive Switching Advantage – You can switch between equity, debt and balanced funds anytime and these switches are not taxable
Stage 4: Exit Advantage – You receive a tax free Maturity Benefit (the payout you receive when your policy ends) subject to conditions of Section 10(10D) of the Income Tax Act (1961).
Tax Benefits Offered Under The Income Tax Act, 1961
Section 80C:
You can claim a deduction from your taxable income on account of premium paid towards life insurance for self, spouse or children. You will be allowed a maximum deduction of up to 1.5 lakh.
Section 10(10D):
The returns earned from Life Insurance policies are tax-free subject to conditions of Section 10(10D) of the Income Tax Act (1961).
Section 80CCC:
You can get tax benefits on premium paid up to 1,50,000/- towards pension/retirement policies. However, if you surrender the plan, the pension/annuity received will be taxed as per the existing tax laws.
Section 10(10A):
1/3rd of the payment that you receive under pension plan at the time of retirement is also tax free. This is known as commutation.
Section 80D:
You can get tax benefits on premiums paid in any mode, other than cash towards health insurance policies taken for yourself, your spouse, your dependent children and your parents. The maximum tax benefits under Section 80D are as follows:
Tax benefit on premium paid up to 25,000 for yourself, your spouse or your dependent children (Limit is 50,000 if the age of insured* is 60 years old or more)
There is an additional tax benefit on health insurance premium paid up to 25,000 for covering parents (Limit is 50,000 if the age of insured* is 60 years or more).
Conclusion
Further, it is to be mentioned that tax treatment of life insurance policies bought from foreign insurers (those not registered in India) may involve additional conditions which would vary from case to case.
Also read- How Do I Use The Online Premium Calculator?
