• 15 JAN 2018

    Income Tax Benefits on Life Insurance Policy

    A life insurance policy is a vital constituent in an ideal financial plan. Life is full of uncertainties; you never know when and how much money you will need to cover the expenses in an emergency. A life insurance policy provides much needed financial assistance at the time of such difficult times by providing a lump sum amount to cover the expenses without burning a hole through lifelong savings. By only paying a relatively small amount as premium, you get a sum assured larger than your total investment by a margin.

    While a life insurance policy is primarily taken to cover a person’s life against any unfortunate event, you can save vast amounts of tax by investing in a life insurance policy. Thus, it can provide you dual benefits of life cover and tax saving by working as an effective tax saving instrument.

    Tax benefits under Life Insurance Policies

    When you invest in a Life Insurance Policy, you are entitled to a tax deduction under section 80C, 80CCC, and 80CCD of the Income Tax Act. The benefit of a tax deduction considerably lowers the taxable income of a person, and he/she has to pay less tax, which in turn increases the overall savings.

    Tax benefits under section 80C

    Among other investments that can let you save tax under section 80C, a relatively good way is through investing in a life insurance policy. The terms for tax savings under this section are:

    • The deduction is available for Indian individuals (Himself/herself, children, spouse) and HUF (Hindu Undivided Family).
    • The maximum amount of deduction under this section is Rs 1,50,000.
    • The deduction is allowed for premium only up to 20% of the sum assured, even if the premium paid is more than 20% of the sum assured in a single financial year.
    • Only deduction up to 10% premium of sum assured is allowed for the policies issued after 1 April 2012 (15% for the individuals suffering from severe illness).
    • If the policy is terminated within two years of the commencement, the benefits received will be reversed.

    Tax benefits under section 80CCC

    • The deduction is available for Indian individuals (Himself/herself, children, spouse) and HUF (Hindu Undivided Family).
    • The maximum amount of Tax deduction under this section along with section 80C is Rs 1,50,000.
    • The deduction is available for people who have contributed money as premium towards any Annuity plan that will pay pension in the future.
    • If the policy is terminated without two years of the commencement, the benefits received will be reversed.
    • Deductions are also not applicable on amounts deposited before 1stApril 2006 under Section 80C.

    It is a great way to save tax with life insurance and lower your taxable income. You are provided with a life cover, a guaranteed lump sum amount in the event of death or maturity (in certain plans) and you get to save tax that effectively increases your overall savings.

    To encourage people to add a life insurance policy to their financial plan, government provides several tax deductions under the Income Tax Act which you can benefit from. We, at Edelweiss Tokio have tailor made plans which you can choose from according to your lifestyle. You can add different riders to make it more comprehensive with the added benefits.

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  • 18 OCT. 2018

    5 Key financial lessons to learn from Dussehra

    Justin and Ajay are very good friends since childhood. Ajay joins Justin every year on Christmas celebration and Justin would join Ajay in Dussehra and Diwali celebrations. Like every year on Dussehra, they both would be enjoying Garba that happens in their society to the fullest.

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