Save Income Tax With Your Life Insurance Premium

Save Income Tax With Your Life Insurance Premium

Being a breadwinner of your family, you must be aware of the financial benefits of having a Life insurance cover. But that’s not all. Life insurance premium can help you save your taxes as well. There are various provisions in the Income Tax Act, 1961 which allow you to save your income tax on the basis of the premium you pay every year for your life insurance coverage.

Life insurance is necessary for the financial security of your family as it caters to the financial needs of your loved ones in case of your absence. When you buy a life insurance, you plan for your future financial needs and with the tax benefits, you can plan it more efficiently as you can save more.

Here are the different ways to save income tax with the help of your life term insurance.

Deductions

Under income tax act, 1961, there are four sections under which you can claim deduction on your insurance premium. They are,

1. 80 C: Under this section, you are eligible for availing deduction if
   • You are paying a premium for your life term plan bought before or on 31st March 2012, which is more than 20% of the sum assured. You can claim a deduction for premium up to 20% of the sum assured you paid for your policy.
   • You bought the insurance on or after 1st of April, 2012; you can claim deductions up to 10% of the sum assured on the premium you pay annually or monthly.
   • You pay premiums towards deferred annuity.
2. 80 CC: Tax deductions available under this section are
   • Policyholders with annuity plans which assure pension income are eligible to get the deductions.
   • Similar to 80 C, if the premium amount exceeds 20% of the sum assured, you can avail deduction up to 20% of the sum assured on your premium payment.
   • The maximum limit of deduction that can be claimed under this section is up to INR 150,000.
3. 80 D: This section allows deduction for
   • Paying premium towards a tax savings plan which is bought for a handicapped person and the limit of deduction is up to INR 50,000. If the insured person has a severe disability, then the maximum limit for deduction can be extended up to 1 lakh.
   • For spouse, children, and self, the qualifying amount for deduction is INR 15,000 where you can inflate it with another INR 15,000 for your parents. If your parents come under the group of a senior citizen, then the amount can be exceeded to INR 20,000.
4. 80 DD: For a dependent person with a disability, if you are paying his insurance premium, you can claim deductions up to INR 50000. In case of severe disability, the amount eligible for deduction is INR 75,000.

Exemptions

You can also get exemptions for any amount received other than the claim settlement amount for your life insurance policy. The sum assured is also tax deductible up to 20% if the policy was bought on or after April 1st, 2013 and up to 10% for policies bought on or after April, 1st, 2012.

Our ULIP tax benefit plan like Wealth Plus plan with accelerated cover can help you save taxes besides providing maturity benefit, facilities like top-up and switch of funds and death benefits. Therefore, the tax saving insurance plan will help you both in planning and to secure your future financially while helping you save more.