What Are The Tax Benefits Of A Money-Back Guarantee 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.

Benefits from Taxes

Let's have a look at the various provisions of the Income Tax Act of 1961.

80C of the Income Tax Act

The advantages of these programmes are defined under Section 80C of the Income Tax Act of 1961. In addition, the maturity benefit, survivor benefit, and bonuses of monthly investment plans are all tax-free. Under the 80c tax deduction, a reduction of Rs. 1,50,000 can be claimed. Simply expressed, under section 80C, the total amount that can be deducted from the tax that you must pay is Rs. 1,50,000. This benefit can be used by an individual or an HFU. For each of the years 2018-19, 2017-18, and 2016-17, the maximum amount that may be claimed through this section is Rs 1,50,000. However, if you do not receive a tax deduction after paying excessive taxes, but have invested in PPF, Medical Claim, or are owed tuition costs, an Income Tax Return can be filed to claim deductions.

Section 80D of the Code

Medical Insurance Premiums Paid Deduction is included in this section. Under section 80D, a person or an HFU can take advantage of this deduction. The maximum deduction is Rs 25,000, which you can use to pay for health insurance for yourself, your partner, and any dependent children. If they are under the age of 60, they are eligible for an additional Rs 25,000 deduction. The additional deduction is Rs 50,000 if the parents are over the age of 60. If the taxpayer and both parents are over 60 years old, the maximum deduction is Rs 1,00,000.

Section 10 (10D)

The amount of the guaranteed payout plus any bonus paid, or the surrender of the policy, or the death of the life assured is totally tax-free for the receiver, according to Section 10(10D) of the Income Tax Act of 1961, subject to a few exceptions. As a result, only the following scenarios will make the policy taxable in the hands of the assured person: The policy proceeds would be taxable in the hands of the insured under section 10(10D) in the case of a life insurance policy issued after 1.4.2003 but on or before 31.3.2012, if the premium due in any year exceeds 20% of the actual sum guaranteed.

Conclusion

The Income Tax Act of 1961 has three primary provisions that provide tax benefits. The portions accessible are 80C, 80D, and 10(10D). The maximum deduction under section 80C is Rs 1,50,000. The maximum deduction available under section 80D is Rs 25,000. The additional deduction is Rs 25,000 if they are under 60 years old. The deduction is Rs 50,000 if they are beyond the age of 60. The deduction is Rs 1,000,000 if both the taxpayer and the parent are over the age of 60. If the life guaranteed fails to furnish a PAN card, TDS of 20% can be charged in 10(10D). The proportion that can be applied under TDS if a PAN card is presented is 2%.

Also Read: Learn Why You Should Think About A Money Back Policy