Life Insurance Income Tax Benefits

Life Insurance plans can be helpful tax planning tools, as the policyholder is eligible to claim benefits under the income tax act of 1961. There are a variety of ways to save money on taxes, but life insurance is one of the most effective.

With Life Insurance plans,you can not only save money on taxes, but also look forward to achieving your long-term goals and providing financial security for the future of your loved ones.

What Are The Tax Benefits Of Term Insurance?

A key additional benefit of life insurance is the income tax benefit offered on a term insurance policy. Before buying a policy, it is a good idea to learn everything there is to know about receiving term insurance tax benefits.

Let's look more closely at the taxation aspects in context of the present income tax policy.

Tax Benefits Offered Under The Income Tax Act, 1961:

1. Section 80C: Under this section you can deduct payments made for life insurance for yourself, your spouse, or your children from your taxable income. A maximum deduction of 1.5 lakh would be allowed to you.

2. Section 10(10D):Life insurance policy returns are tax-free if certain conditions are met under Section 10(10D) of the Income Tax Act (1961).

3. Section 80CCC:Payments made for pension/retirement policies up to 1,50,000/- are eligible for tax benefits. If you quit the plan, meanwhile, the pension/annuity you get will be taxed according to current tax rules.

4. Section 10(10A):At the time of retirement, 1/3 of the income you earn under a pension plan is tax-free, referred to as commutation.

5. Section 80D: You can receive tax benefits on health insurance premiums paid in any manner other than cash for yourself, your spouse, your dependent children, and your parents.Under Section 80D maximum benefits are given below-

• There is a tax credit of up to Rs.25,000 on health insurance premiums paid to cover parents (the limit is Rs.50,000 if the insured* is 60 years or older).
• Benefit from a tax credit of up to Rs.25,000 on premiums paid for yourself, your spouse, or your dependant children (limit of Rs50,000 if insured* is 60 years old or older).

6. Section 80CCE:In this section,the total deduction from taxable income for tax benefits under Sections 80C, 80CCC, and 80CCD(1) is limited to 1,50,000/-.

Deductions

Following are the deductions of Income Tax Sections:

1. 80C/80CCC

2. Individual and Hindu Undivided Family taxpayers are eligible for the benefit.
3. If the value of insurance premium for a policy in a finance year exceeds 20% of the real capital sum assured, the deductions will be limited to premiums up to 20% of the sum assured.
4. For insurance plans established on or after April 1, 2012, only the amount of the premium paid that does not exceed 10% of the actual capital sum guaranteed is deducted. In the situation of a person with a severe disability or a specific sickness, 15% of the actual capital total is guaranteed.
5. If the policy is canceled to be in effect within 2 years for traditional products and 5 years for ULIP products after the date of policy beginning, the above advantages will be reversed.
6. The maximum deduction that an applicant can claim under Sections 80C and 80CCC is Rs. 150,000.

2. 80D

1. Individual and Hindu Undivided Family taxpayers are eligible for the benefit.
2. Section 80D allows for a deduction of up to Rs. 25,000 for the self, spouse, and dependent children, as well as an extra deduction of up to Rs. 25,000 for the parents.If the parents are senior citizens, though, a higher amount of up to Rs. 25,000/- is available. Within the specified overall limit, the taxpayer is permitted to make any payment for preventive healthcare check ups up to Rs. 5,000.

3. 80DD

Premiums paid for impaired dependents are deductible up to Rs. 75,000 each year. If the dependent is a person with a serious disability, a larger deduction of Rs. 1,00,000 will be granted.

Exemptions

Following are the exemptions of Income Tax sections:

10 (10D)

Any money received as a result of a life insurance policy, including any money given as a bonus is tax-free. This law, meanwhile, does not apply to the following amounts:

1. Sum received under Section 80DD(3), or
2. Amount received as a result of a Keyman Insurance Policy, or
3. Any payment received except as death benefit under an insurance policy which has been issued on or after April 1, 2003, but before March 31, 2012, if the premium received in any year throughout the term duration does not exceed 20% of the total guaranteed.