Life Insurance – The Best Form Of Investment That Can Also Be Tax Saving Investment Plans In India
About Life Insurance Plans in India
With the increase in income, there is also a substantial increase in the taxes that one has to pay. Out of the many methods of investment in life insurance plans in India, which give out the benefits of tax savings, one of the most important way is to invest in a lucrative life insurance policy to save a good amount of tax payment.
Life insurance is one of the primary and essential requirements of ensuring a financially balanced and comfortable life for your loved ones in comparison with having no policy at all. The capital benefits that come with life insurance help your family build a safeguarded future, even in your absence.
Tax Benefits:
There are Income Tax benefits Under Section 80C up to a deduction up to Rs. 150000 and under section 10(10D) of the Income Tax Act 1961 benefits on the maturity amount arising out of life insurance plans in India. If the premium paid for the life insurance policy of this amount does not exceed 10% of the total sum assured (bought after 1st April l 2012), the maturity benefits are tax-free.
Life insurance policies bought before 31st March 2012 this figure was 20% of the total sum assured.
A few important aspects of tax benefits under life insurance policies are as follows:
- The maximum amount of tax exemption is Rs. 1,50,000 on life insurance plans in India.
- This includes other kinds of financial products udder section 80C of the Income Tax Act, 1961
- Rs. 1.50 lakhs are the total amount of tax benefit that can be derived after combining three sections – 80 C, 80CCC and 80CCD of the Indian Income Tax department.
- In case the life insurance policy is terminated (except ULIP) within 2 years of its commencement, then the benefit gained under this section will be reversed.
Taxation Benefits and features of Life Insurance Policies:
- People investing in life insurance policies are eligible for tax benefits under section 80 C of the Indian Income Tax Act 1961.
- Under the provisions of section 10(10A) (iii) and 10(10D), the policyholder is also eligible for tax exemptions on maturity proceeds benefits.
- Besides the taxation, the life insurance cover also provides protection against financial losses during the life of the policyholder - example a loan which he may not have been able to pay during his lifetime will be covered within the policy maturity amount.
- For the premium paid towards life insurance policies, a maximum of Rs 1.50 lakhs can be allowed as tax deduction (including all other forms under section 80 C). So, the cumulative amount under section 80 CCD (1), 80 CCC and 80 C should be Rs. 1.50 lakhs.
- Any life insurance policy purchased before 31st March 2012 will be eligible for tax deduction of 20% of sum assured and for policies purchased after 1st April 2012, the amount is reduced to 10% of sum assured.
- Only the premium paid by the policyholder in a specific financial year towards his life insurance policy will be eligible for tax deductions.
- If the premium is not paid for some time and later when it is paid altogether, tax will be deducted on that. Similarly, if the policyholder derives tax benefits and terminates the policy within 2 years, the same will be reversed and the entire premium paid in those two years will be taxable.
- Premium paid towards self, spouse, dependents or parents; will all be treated as cumulative premium is eligible for tax deductions. Any other premium paid towards a distant relative like a sister in law, brother in law will not earn the tax deduction benefit.
Tax deductions are eligible in all cases –Life insurance policies issued by Public and Private companies.
