Tax Benefits under Child Insurance Plans

Child Insurance Plans are a combination of a life Insurance Plan and a Savings Plan. The Savings part helps you build a corpus that can be utilized when the need arises such as expenses related to your Child’s High School or College, expenses related to Marriage, etc. You can pre-define the stages when you want to use the Benefits or the Monetary Value from the Policy. The second aspect is the Insurance Cover part which provides a financial cover even in your absence.

The Child Plans offer Benefits that will secure your child from any Financial Distress and will make sure nothing comes in between your Child’s Dreams.

In this Article, we will discuss Tax Benefits under a Child Insurance Policy.

Tax-Saving Benefits Under Child Plans

A Child Plan offers significant Tax-Saving Benefits on both the Premiums Paid and on the Policy Benefits received upon Maturity and during the Policy Term. Amounts of Premium Paid under a Child Education plan, up to an amount of 1.5 lakh, is Tax-Deductible under Section 80C of the Income Tax Act 1961. Moreover, the Policy Benefits received during the Plan's Duration and upon Completion of the Policy Period are exempt from Taxation, according to the Regulations of Section 10(10D) of the Act.

Tax Exemption Benefits Under Child Plans

The Child Insurance Plans come with an Investment Factor where a part of the Policy Plan is invested in the Market. These Market Investments have higher risk involved, however, the higher the risk higher the returns. The Best part is that the returns that you received from a Child Insurance Policy have an added perk of Tax Benefits.

Tax Benefits on the Insurance Premiums

The Premium that you pay for a Child Insurance Plan is eligible for Tax deductions under Section 80C of the Income Tax Act. You can claim the deduction from your Taxable Income for this. However, deduction is up to Rs 1.5 lakh a Year.

Tax Benefit on the Income generated from a Child Insurance Plan

Any income from the Plan is Tax-Free under Section 10 (10D). These incomes include the Maturity Benefit, Death Benefits, Survival Benefits as Money Back, or any other income that may be generated from the Child Insurance during the Policy Term.

Medical Expenses Benefit for Children

The Parents of Children with special needs can Claim Tax Deductions from their Annual Income. This is available in some cases: For the Money that is spent on the Child's Treatment, the parent can claim up to 33% deductions under Section 80 DDB and expenses relating to minor and Major Disability of Child the Parent can claim deduction up to 40% (Minor Disability) and 80% (Major Disability) of expenses under Section 80DD.

Loan Benefits for Higher Education

Higher Education Expenses are shooting up by the day. Quite hard to imagine how much it would all cost when your child is ready for higher studies. You can avail a loan for your Child’s Higher Education. As per Section 80E, the interest you pay on the loan would be Tax-Deductible.

Benefit of Creating Funds 

You can Claim Partial Tax Deductions from a Fund you set up especially for your Child. All you have to do is transfer the amount to a separate fund that is meant for your child. Do not claim or withdraw any sum from it before the child is old enough to pursue higher studies.

Tax Benefit for Tuition Fee

 As per Section 80C, you can claim an Annual Reduction of up to Rs 1 lakh on Tuition Fees for your Child. This Exemption is available for up to two children. But to avail of this Benefit, the Tuition Fees must fall under a prescribed bracket. High fees might not qualify for exemptions.

Conclusion

Child Insurance does provide Tax Benefits under various circumstances and will provide Additional Savings on top of the other benefits of the Child Insurance Policy.

Also read 

Benefits of Riders in a Child Insurance Plan

Top 5 Questions Asked While Purchasing a Child Insurance Plan

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.