Term Insurance Plans And Associated Tax Benefits
Table of Contents
A tax-saving tool is term insurance. In addition to earning a tax benefit, policyholders receive reliable life insurance coverage for their families and can avoid worry in the long run.
To help you save money on taxes, numerous provisions of the Internal Revenue Code provide a variety of deductions and exemptions (Income Tax Act). Taxpayers who invest in a variety of securities can take advantage of these deductions and exemptions. The deadline for tax-deferred vehicle investments is March 31, 2020.
Term insurance is a sort of coverage that lasts for a set amount of time. A term insurance policy is one that insures you for a specific period of time, as the name suggests. It ensures a large sum of money in exchange for a low fee. If the policyholder dies during the policy period, the money promised is paid to his or her nominee.
By acquiring term insurance, you may fulfil your responsibility of providing financial security to your family while you are away. You may be able to obtain tax benefits as a result of this process. Many people aren't aware that term insurance policies come with a slew of tax benefits, making them one of the best life insurance options available. But wait, a term insurance policy and moneyback have the same tax advantages. The benefits are the same with both types of insurance coverage.
Tax Benefits On Term Plans
You can take advantage of a number of term insurance tax benefits, as previously explained. Here are a few examples:
Deductions under section 80C
Term insurance premiums can help you save money right now by allowing you to deduct them from your taxes. Section 80C allows for a deduction of up to 1.5 lakh. Section 80D of the Internal Revenue Code allows you to deduct health insurance premiums from your taxes. If you have a Critical Illness Rider, Surgical Care Rider, Hospital Care Rider, or other add-on cover on your term insurance or money back plan, you can save money on taxes.
Section 10 (10D) of the Income Tax Act provides for certain benefits.
The death benefit provided to the nominee under Section 10 also qualifies for the tax advantages (10D). When a catastrophic event occurs, the policyholder's death benefit or amount assured is paid to the policyholder's family, guaranteeing that the family has the required financial security while avoiding taxes.
Exemptions are essentially provided for under Section 10 (10D) of the 1961 Income Tax Act. Any money received as a death benefit or maturity benefit for a term or moneyback plan is tax-free, including any bonuses. It makes no difference whether the funds originate in India or elsewhere.The benefit amount may be liable to tax if the policyholder chooses not to have the benefit paid out immediately. In this case, the insurance company keeps the money until it is paid out, which occurs after a period of interest accrual. Normally, interest accrued is taxed.
Conclusion
Everyone wants to save money, particularly when it comes to taxes. There are a few aspects of term insurance that you should be aware of when it comes to income tax.
Also read - Features And Benefits of LIC Tech Term Policy
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.
