The Indian Income Tax Act 1961 has provisions for taxpayers to claim tax benefits if taken a life insurance policy. These are valid only for individuals and Hindu Undivided Families.
The Answer Surprise you!
One of the most popular income-tax deduction benefits that most taxpayers use to hold and maximize each year is Section 80 C.
Under Section 80C
- The maximum amount deductible is Rs 1.5 lakh.
- Deductions are only on premiums up to 20% of the sum assured on conditions the premium amount in a financial year is more than 20% of the actual sum assured.
- For policies on or after April 1, 2012, the deduction will be for only so much of the premium payable which does not exceed 10% of the actual capital sum assured.
- Benefits will be reversed if the policy ceases to be in force within two years for traditional products and five years for ULIPs after date of commencement of the policy.
Under Section 80D
- Qualifying amounts for an individual assessee for self, spouse and dependent children are up to Rs 25,000 and for parents, there is an additional deduction of Rs 25,000.
- If parents are senior citizens then the qualifying amount is Rs 30,000.
- Assesses can make any payment for preventive health check-ups up to Rs 5,000 within the prescribed limit.
- If senior citizens over 80 have no insurance plans then the medical expense of up to Rs 30,000 can be claimed as an exemption.
Under Section 10 (10D):
As per Section 10 (10D), the life insurance policy claim amount and a bonus (if any) will be completely tax-free for the nominee, or receiver, regardless of whether the amount is received on –
- The death of the insured
- Surrendering the policy (ending the policy middle-term)
- Maturity of the policy (completion of the policy term)
There are many life insurance plans out there from various insurance companies that can help you save on tax under various sections of the Income Tax Act, 1961. Check with your insurance provider on the tax-saving opportunities under various sections before signing your policy document.