Know All About The Tax Benefits From Life Insurance
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A life insurance policy's primary goal is to offer financial security to the life assured's family in a tragedy. A life insurance policy, however, is more than just that. Under certain sections of the Income Tax Act of 1961, the life assured also receives tax benefits on all types of life insurance policies. Let us learn about these tax benefits.
Life Insurance Tax Benefits Provided Under the Income Tax Act, 1961
The following are some of the tax advantages available under the Income Tax Act.
1. Section 80C (Income Tax Act, 1961)
Section 80C of the Income Tax Act of 1961 allows all life insurance plans to be tax-free.A term life insurance policy, whole life insurance plans, endowment plans, money-back policies, and unit-linked insurance plans (ULIPs) qualify for a life insurance premium tax benefit. This provision allows for a maximum deduction of Rs. 1.5 Lakhs. Moreover, even the premium paid on insurance coverage for self, spouse, dependent children, and, in some situations, dependent parents are tax-deductible. However, in order to qualify for 80C, your total premiums in a fiscal year must not exceed 10% of the sum assured.
2. Section 10(10D) (Income Tax Act, 1961)
The amount you receive from the insurance company is totally excluded from income tax under this provision, except in certain circumstances. The total assured, bonus, maturity value, surrender value, and death benefit are all excluded from the tax. However, it must be noted that the insurance policy for which the premium payable for any of the years during the policy's term exceeds 10% of the actual capital total assured is not eligible for the Sec 10(10D) benefit. This does not apply to any money obtained as a result of a person's death.
3. Section 80CCC (Income Tax Act, 1961)
This provision exempts taxation on any sum put into an insurance company's annuity plan or retirement plan to secure a pension. This provision also allows for a maximum deduction of Rs. 1.5 Lakhs. However, surrenders and withdrawals before policy term completion will be taxed.
Moreover, the pension you get after the completion of a predetermined policy term will be taxed.
Take Away
In India, a life insurance policy is one of the most popular investment options because it supports tax planning. However, it is advisable not to think about the tax benefits while purchasing a plan; instead, you should think about the life benefits it can provide. Your family is your most valuable asset, and your life is your most valuable investment. And by purchasing a life insurance policy, you guarantee that your loved ones will have a financially secure future.
Must Read: Why Life Insurance Is A Must Have For Working Women?
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
