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 On Maturity of a pension plan, one third of the withdrawn amount is tax free which provides maximum benefits to the individual.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.

money back policies help plan foreseeable expenditures

  • Easypolicy
  • 15 Nov 2012

When we take up responsibilities, we anticipate the financial liabilities attached. We foresee expenditures that will happen from time to time. Take for example the birth of a child. Five years and you will need finances to get the child into a good school, another five years and the child’s fees and extracurricular activities put a financial burden then come higher education and so on. There is a need to fulfill the basic requirements of life having a car in next few years, arranging for a corpus to buy property, home renovations every few years. The lists are never ending.
Money back policies are quite popular as they offer insurance savings and regular returns. Timely purchased money back plans dissipate a major part of such financial liabilities.
Money back plans are fixed duration insurance plans with savings feature attached and hence an investment linked insurance policy. There is a sum Assured if the Policy holder dies within the duration but money back plans are taken primarily for the survival benefits. The survival benefit, in case of a money back plan, is paid at regular intervals rather than at the end of the term. You start receiving back a fixed percentage of the Survival Benefit at a after every five years or ten years or as the policy mentions.
While taking the money back plan, there are a few things that you may want to take care of:
1.The duration at which you get the money back coincides with your anticipated expenditures

The amount you get every time takes of substantial financial burden

Premium amount and what percent age of it goes for insurance and what for the investment

Premium paying term

Usually the point of debate is that the returns are lower than a market linked policy of the same amount. Consider this: most insurance policies announce Loyalty Additions from time to time. They are added to the survival benefit. Many insurance companies have a policy of giving guaranteed benefits, a fixed percent of sum assured. All these benefits are added to the Maturity amount at the end of the policy.
An important benefit of a Money Back Policy is that even if the policy holder dies after having received a few money backs, full Sum Assured is given to the nominee without deducting the already paid amount. This facility strengthens its role as a life stage planning instrument.
If you have taken the policy for pre defined purpose as in case of planning child’s education needs, you may opt for Waiver of Premium rider, often offered by the insurance companies with money back plans.  Here the Beneficiary receives the benefit in due course of time without having to pay any further premiums in event of your untimely death.

Here it is important to note that the certain child plans where the maturity amount can be split into two or more maturity stages are not considered money back plans but “child plans allowing periodic payment of maturity amount”.
Considering the other benefits, returns are reasonable. It is a good policy for low Risk profile people who wish to save and invest in safe plans. Since these are not flexible plans and surrender value, if you wish to terminate the policy before its term, is not much, one needs to understand the provisions of the policy before buying it.