Life insurance helps in protecting yourself and your family members against uncertainties that may arise in the future. Life Insurance is also useful in the present, as it can help you save income tax. Tax savings are an essential part of financial planning and it can be easily achieved with life insurance. Here’s a quick guide on how to save income tax with insurance.
Saving tax with Life Insurance:
In case of life insurance tax benefits are available on the premium paid under Section 80C. Tax benefits are also available to the nominee on payouts/bonus received as death benefit. Any payout received by the insured upon the maturity of a life insurance plan is also eligible for tax benefits. These tax benefits on the payouts can be availed under Section 10 (10D).
Tax deduction on premium paid
You can claim tax benefits on premiums paid to maintain a life insurance policy of yourself, your spouse or your dependent children. The maximum tax exemption under Section 80C is Rs 1.5 lakh p.a.
Tax deduction on payouts
This tax benefit comes under Section 10 (10D) and is available as a death benefit or as maturity benefit depending on the nature of the policy. However, the tax benefits under Section 10 (10D) are not available under the following scenarios.
Tax benefits under Health Insurance:
Tax benefits for premiums paid for health insurance is available under Section 80D. Health insurance can be a part of life insurance policy or it can be an entirely different policy. Health insurance covers preventive health checkups, illnesses, doctor consultation fees, cost of medicines and surgery, expenses on stay in hospital, etc. Under Section 80D, you can claim deduction for premiums paid for health insurance policies or critical illness policies. Here are some important things you should know about tax benefits available with health insurance.
Tax benefit under retirement plans
These are different from life insurance, as they cater to the needs of the individual after their retirement. Tax benefits on amount contributed towards these plans are available under Section 80CCC and 80CCD (1). The max deduction under Section 80CCC is Rs 1 lakh. These Sections are part of Section 80C and the total deduction available under Section 80C, 80CCC & 80CCD (1) does not exceed Rs 1,50,000. Tax benefits are also available on payouts received under such plans.
You can use online tools such as income tax calculator to understand which insurance plan is most appropriate for you as per your income slab.