Other Tax Saving Options
Why is Life Insurance so important?
Life Insurance is a must have!
Life Insurance is a basic financial need of all working individuals that have dependents relying on them for financial support. In fact, a Life Insurance policy is the first financial product considered by most individuals because financial security of family is of utmost importance. In addition to protecting your family, Life Insurance can also be used to accumulate wealth for future needs. There are various options (listed below) available depending upon the specific needs of the individual. Our advisors will be happy to assist you with these.
Tax benefits available when buying Life Insurance: Life Insurance policies issued in India come with added tax benefits that make these policies a cost-effective long-term protection cum investment option. They currently fall under the "EEE" regime, i.e., the premiums paid, income earned, and payment of maturity proceeds or claims are all 100% exempt (E) from tax subject to the limit specified under relevant provisions of the Income Tax Act. At the time of purchase of the policy, an investment of 1 lakh or more can save you 30,900 in Income Tax. You can choose to buy a policy for a larger amount, but the tax exemption will be limited to an investment amount of 1 lakh only. |
More on tax benefits through life insurance:
Premiums on Life Insurance:
Premiums paid towards covering life of an individual is eligible for deduction under Section 80C of the Income Tax Act. At the time of purchase of the policy, an investment of 1 lakh or more can save you up to 30,900 in Income Tax. Of course you can choose to buy a policy for a larger amount; however, the tax exemption will be limited to an investment amount of 1 lakh. Premiums on Health insurance policies and Riders: Health Insurance premiums and riders such as critical illness riders, and other health-related riders attached to a Life Insurance policy are eligible for deduction under section 80D of the Income Tax Act. This deduction is available to both individuals and Hindu Undivided Families(HUFs). The maximum amount deductible is 15,000 per year for an individual or his family and an additional deduction of 15,000 per year where policy is taken on the health of dependent parents. However, the additional amount of 15,000 will be replaced with 20,000 per annum, in case parents are senior citizens of age 65 years and above. This can save tax upto 4,635 and 6,180 respectively. Both can be clubbed together to avail the maximum benefit of upto 10,815. Death Claims, Survival and Maturity Benefits: Payments received as survival benefits(money back, etc.), maturity proceeds etc. towards Life Insurance policies are exempt from tax under section 10(10D) of the Income Tax Act subject to fulfillment of the condition that the premium should not exceed 10% of actual capital sum assured at any point of time during the tenure of policy. Moreover, amount received on death of the policyholder is exempt from tax, without any conditions. |