A smart way to reduce taxes
Life insurance is a crucial investment, necessary to assure the security of your loved ones. It gives unparalleled advantages to not just you and your family and dependents, but comes with a bonus of saving taxes, too. At the close of every financial year, you may wonder how much of your hard earned cash will you lose in taxes. You need to channel your money in a way that makes you tax-efficient.
Insurance is a necessity for all, but did you know that it could save you money on taxes, too? Investments in life insurance policies give you tax benefits for the amount you pay for the plan. They qualify for no taxes when the premium is up to Rs 1.5 Lakhs, as per section 80C of the Income Tax Act.
Mr. Khan’s savvy investments
Let’s consider the case of Mr. Khan, who is a smart businessman, wants to ensure that he lives his retired life well, and his family is also taken care of if he passes away. So, he invests in two schemes: a term plan and an endowment scheme. The annual premium is eligible for tax deduction since it’s less than 10% of the sum assured. Mr. Khan regularly pays his premiums and he knows that the payout will come into his hands tax-free. He has also updated his PAN details, so that he will not lose 20% TDS when he receives his payout.
In the case of his endowment plan, he follows the same formula. Since an endowment plan is a combo of both insurance and investment, he is assured a higher return. After almost 40 years of service, Khan retires. His endowment scheme which has been in the process for almost four decades is also matured. He receives a handsome payout, the sum needed to live his life in peace, without paying even a rupee in tax.
Mr. Khan passes away and his wife is deeply distressed. Ms. Khan is frightened that although the company shall pay the claim of Rs. 1 crore, she will lose a substantial amount of 30 lakhs in tax bracket of 30%. But Mr. Khan who knows the laws has ensured that his wife wouldn’t be in trouble. She receives the payout without stress since claim income is not taxable under 10 (10D) of the Income Tax Act 1961.
An example to emulate
Tax is a reality that we have to meet in life, but insurance is an excellent way to reduce taxes and grow your wealth potential. This is one of the best ways to ensure the interests of your loved ones, and to get benefits without having to invest in multiple streams. Hence, be smart and invest in the right insurance plan so that you can save yourself from paying hefty taxes.
Now, what are you waiting for, enroll with Edelweiss Tokio Life and live a stress free life.