Tag Archive | "Investment Insurance"

tax effective planning for insurance and investment

  • Easypolicy
  • 28 Dec 2012

Tax planning services are gaining immense popularity in the financial market today owing to the utilization of effective tax planning strategies by various companies and individuals. Tax effective strategies for maintaining proper insurance and investment plans are what the whole world is running after. It is very evident that individuals involved in any profession or any business venture or entrepreneurship venture takes utmost pains to locate deductions that they are eligible for.
Benefits of Insurance policies in terms of protection, returns and tax benefit

Insurance plans provide a wide range of life cover and investment options to customers. With a life insurance plan, the Policyholder can rest assure that his family’s present and future life will not suffer if he is not around them to take care of their financial needs. Besides, life insurance plans offer income tax benefits. Tax effective planning for any investment and insurance is a task that has to be given prime importance when complete satisfaction is desired in the concerned field. A tax calculator can be used to calculate the income going to taxes every year.

Tax benefit on Life insurance plans (Under Section 80C of the Income Tax Act)

Section 80C of the Income Tax Act provides the alarming benefits of being eligible for a deduction amounting to about Rs 100,000. It gives the customers the option to Claim deductions based on the life insurance premium, home loans, principal payment, and PPF deposits and so on. The benefits are available for individual assesses and also to the Hindu undivided family assessee. The individual, spouse or children of the assesses can benefit from the deductions. Any member of the family can benefit when the HUA assessee is considered. It is the most effective tax saving instrument and can offer protection, efficient long Term savings and proper tax planning.

Tax benefit on Pension Plans (Under Section 80CCC)

Premiums paid under a pension scheme gets deductions with the Section 80CCC in function. The total amount deposited in the form of pension excluding the bonuses and interest is deducted from the total income when tax calculations are made. This gives considerable tax benefits to those enrolled in pension schemes as a part of life insurance policies. On Maturity of a pension plan, one third of the withdrawn amount is tax free which provides maximum benefits to the individual.

Tax benefit under Section 80DD

Less people are aware that Section 80DD provides tax benefits to an individual which is a welcoming aspect for all people. Deductions up to Rs 50,000 per year can be gained for any kind of medical treatment for a handicapped dependent individual. The benefits can be gained by furnishing a medical certificate. In case of severe disabilities, larger amount upto Rs 100,000 can be claimed.

Tax benefit on returns under Section 10(10D)

With respect to the Section 10(10D); there is an advantage of getting tax free returns for the sum received under the life insurance policy. This also includes the sum that has been allocated for bonuses. The death benefit  and maturity benefit is completely tax free under this section.

Services related to tax plans and tax saving techniques is an investment worth making when experts are consulted and professional help is taken.

Insurance and Tax Planning

  • Easypolicy
  • 17 Dec 2012

People have been buying life insurance over the years not just for the insurance part of the equation – it is the Tax Benefit as well as investment insurance that catches people’s imagination. Income tax is an expense that you would want to reduce. When you file income tax return, it would help to have options that work towards the tax saving potential of your investments. And life insurance becomes just the right set of tools to save tax.

Life Insurance and Tax Benefit:

It is a known fact that many people take up life insurance to save tax. However, let’s face it – that is not the primary selling point of life insurance. In fact, life insurance should not even be considered primarily from the perspective of investment insurance, since the very purpose of life insurance is to insure against risks that might put your family and Dependants in trouble. Life insurance provides financial security to people who look to secure the future of their family and loved ones.

The tax benefit as well as the investment potential associated with life insurance is essentially incidental. However, the tax benefit that comes with life insurance is significant enough to make material difference to your expenses associated with income tax return.

Tax Saving in Life Insurance:

According to legislation under Section 80C, a sum of Rs. 100,000 is eligible to be exempt from taxable income when it is invested towards premiums in life insurance. And the Section provides for investment in other options as well, as in the case of employee provident fund, public provident fund, equity linked mutual funds, and in National Savings Certificates.
One of the key factors to keep in mind when buying life insurance is tax. Although insurance should not be bought to save tax, the tax savings provided under various Sections of the Indian Income Tax Act, make buying insurance “cheaper” as well as an efficient investment for long Term savings.

With life insurance, any Premium paid by the individual towards insurance policies taken in his or her own name, in the name of their spouses, or in the names of any of their children, would be tools for tax saving, as long as the premium paid towards insurance does not exceed 20% of the sum assured.

It may be noted that there are legislative changes that propose a decrease in the limit of exemption to save tax from insurance premium paid to 10% or less of the sum assured. In effect, this would allow for higher amounts of sum Assured on premium paid, which should be beneficial to the investor. It would help to keep a tab on changes in legislation with regard to tax plan and its impact on tax saving.

Tax plan and Maturity benefits / death claims:

It is not just the premiums towards life insurance that are exempted from income tax. Section 10(10D) of the Income Tax Act postulates that payments made to the Insured by the Insurer upon maturity of the insurance Policy or in the form of payments on death claims would be exempted from income tax, thus proving the worth of insurance as instruments to save tax. However, single premium policies may not be eligible for exemption under the tax plan.