What Are The Tax Advantages Of A Money-Back Policy?

A Money Back Plan is a form of life insurance policy that pays out on a regular basis as part of the policy's survival benefit throughout the policy's term. As a reward for surviving, insurance firms offer a survival benefit, making it a viable investment strategy. Unlike other life insurance plans, which pay the beneficiary at the conclusion of the policy period, the

Money-Back policy pays the beneficiary constantly throughout the policy term. Instead of a single lump-sum payment at the end of the policy period or at death, the policyholder will receive recurring payouts throughout the rest of his or her life.

Tax Benefits of Money Back Policy

Now let's look at the different sections of the Income Tax Act,1961.

1. Section 80C

Section 80C of the Income Tax Act of 1961 defines the benefits of these schemes. In addition, the monthly investment plans' maturity benefit, survivor benefit, and bonuses are all tax-free. Reduction of Rs. 1,50,000 can be claimed under 80c tax deduction. To put it simply, the total amount that can be reduced from the tax that you must pay is Rs. 1,50,000 under section 80C. An individual or an HFU is allowed to avail of this benefit. The maximum amount that can be claimed through this section is Rs 1,50,000 for 2018-19, 2017-18, and 2016-17 each. However, if you miss getting the deduction of the taxes after you’ve paid excess taxes, but you have invested in PPF, Mediclaim, suffer from tuition fees, etc, Income Tax Return can be filed to claim deductions. 

2. Section 80D

This section provides for Medical Insurance Premium Paid Deduction. An individual or an HFU is allowed to avail of this deduction under 80D. The maximum deduction is Rs 25,000, You can claim this for your health insurance of yourself, your partner, and the children depending on you. If they are younger than 60 years old, an additional deduction of Rs 25,000. If the parents are older than 60 years old, the additional deduction is Rs 50,000. The maximum deduction is Rs 1,00,000 if the taxpayer’s and parent’s age is older than 60 years old. 

3. Section 10(10D)

Section 10(10D) of the Income Tax Act,1961 says that the amount of sum guaranteed plus any bonus paid or the surrender of policy or on the death of the life assured is completely tax-free for the receiver subject to certain few conditions. So, the policy will be taxable in the hands of the guaranteed person only in the following situations: Under section 10(10D) in the case of a life insurance policy that has been issued after 1.4.2003 but on or before 31.3.2012 and if the premium which is payable in any year exceeds 20% of the actual sum guaranteed, then the policy proceeds would be taxable in the hands of the insured.

Conclusion

Three main sections are available for tax benefits under the Income Tax Act, 1961. The 80C, 80D, and 10(10D) are the sections available. Under 80C, the maximum deduction is Rs 1,50,000. The general deduction under 80D is Rs 25,000. If they are younger than 60 years old, the additional deduction is Rs 25,000. If they are older than 60 years, the deduction is Rs 50,000. If the taxpayer and the parent are older than 60, the deduction is Rs 1,00,000. In 10(10D), if the life assured fails to provide a PAN card, 20% TDS can be applied. If the PAN card is provided, the percentage that can be applied under TDS is 2%. 

Also Read: Understand What A Money Back Plan Is And How It Works

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.