Life insurance plan not only provides a Risk
cover or Death Benefit
case the life Assured
dies within the Term
plan, it also provides income
through tax deduction and tax exemption. Although
investment based life insurance policies are also subjected to various
tax reliefs. So, prudent people choose a life insurance plan
to ensure a dual advantage – tax saving as well as life cover.
tax deduction, amount allotted under this category can be deducted from
total income of an individual – thus, the income tax reduces in similar
proportions. In tax exemption, the amount allotted under the category
is not kept under the purview of income tax. While filing income tax
return, a tax payer must specify his investments, say life insurance
policies or health cover plans to ensure he gets the due tax benefit.
insurance is a key player in helping individuals to reduce tax and plan
the amount of tax needed to be filed. Let us check how it can be done.
Reducing Income Tax Through Tax Deduction
There are various sections under Income Tax Act that are applicable for life insurance investments. For instance:
up to Rs one lakh per year for life insurance plans are subjected to
tax deduction as per Section 80C of the Income Tax Act.
of contribution to Pension
funds, tax deduction will be applicable for
contribution up to Rs one lakh per year as per section 80CCC. However,
surrender or pension amount is taxable.
•In case you are paying
towards an insurance scheme for the maintenance of a disabled dependent,
then under Section 80DD you can save tax upto 50, 0000 and in case
handicapped dependent is suffering from severe disability, you can save
upto Rs 100,000 from taxable income.Clipping Income Tax Through Tax Exemption
earned are generally subjected to income tax. However, in life
insurance, many benefits are subjected to tax relief as per various
sections under the Income Tax Act. For instance; Under Section 10(10D)
of the Income Tax Act, income from investment based insurance plan is
also subjected to tax benefit. It means that death benefit, Maturity
benefit and ancillary benefits arising from Bonus
points will be exempt
from tax. Hence the Policyholder
would be able to enjoy tax free
Even though there is tax relief, you may find it
difficult to assess the amount of tax you need to pay for a particular
year. Online tax calculator helps to calculate the total income tax
after tax deduction and tax exemption.
With an expected return
and security in case of unforeseen events, life insurance is a savor for
many families. It also helps to save money through many useful tax