Read All About Life Insurance Tax Benefits
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The fundamental purpose of a life insurance policy is to provide financial protection to the life assured’s family in case of an unfortunate event. However, there is more to a life insurance policy. It also provides saving and investment opportunities through its various kinds of policies.
The life assured also enjoys tax benefits on all kinds of life insurance policies under some Sections of the Income Tax Act. Read on to know about them in detail.
Life Insurance Tax Benefits Offered Under the Income Tax Act, 1961
Here are some tax benefits that are offered under the Income Tax Act.
1. Section 80C
Under this, the policyholder can claim a tax deduction on the payable premium of the life insurance policy. He/she can enjoy tax savings up to the maximum amount of Rs. 1.5 Lakh each year. The claim can also be made on the life insurance policy of the individual's spouse or children.
Here are some terms which should be kept in mind while availing the tax benefits under this section.
- Policy Issued Before 31st March 2012 - According to this, the payable premium on the life insurance policy should not be more than 20% of the sum assured decided at policy inception.
- Policy Issued On and After 1st April 2012 - According to this, the payable premium on the life insurance policy should not be more than 10% of the sum assured decided at policy inception.
- Policy Issued On and After 1st April 2013 - According to this, the payable premium on the life insurance policy should not be more than 15% of the sum assured decided at policy inception. However, this benefit is applicable on only disabled life assured’s policy(under Section 80U) or the life assured who is suffering from an ailment(under Section 80DDB).
2. Section 10(10D)
Under this, tax exemption is given on the sum assured provided as the maturity benefit or death benefit to the life assured or the beneficiary, respectively, under some specified conditions.
Here are some terms which should be kept in mind while availing the tax benefits under this section.
- Policy Issued Before 31st March 2012 - According to this, the amount paid to beneficiaries as death benefits are exempted from taxes. Moreover, tax exemptions are made if the payable premium on the life insurance policy is less than 20% of the sum assured decided at policy inception.
- Policy Issued On and After 1st April 2012 - According to this, tax exemptions are made if the payable premium on the life insurance policy is less than 10% of the sum assured decided at policy inception.
3. Section 80D
Under this, the policyholder can claim a tax deduction on the payable premium of the health insurance policy and even on life insurance policies with additional health cover like critical illness rider, hospital care rider etc. The claim can also be made on the health insurance policy of the individual's spouse or children.
Here are some points about the maximum limit of tax exemptions which can be availed under this section.
- Health Insurance Premium - Under this, the tax benefits are only applicable up to Rs. 25,000.
- Health Insurance Premium for Dependent Parents - Under this, the additional tax benefit of Rs. 25,000 can be received if the policy is for your parents.
- Health Insurance Premium for Senior Citizens - Under this, the additional tax benefit of Rs. 50,000 can be received if the policy is for your senior citizen parents.
Conclusion
The tax benefits mentioned above can be enjoyed on various life insurance policies, but this should not be the only reason behind purchasing a policy. It is advisable to buy the most suitable life insurance policy which meets your family’s requirements and future goals. You can also take advice from an entrusted insurance agent to help evaluate your needs.
You may also like to read - 20 Basic Life Insurance Terms You Should Know About
