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Tax Planning With Life Insurance

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Life insurance policies are one of the most popular tools used by a vast majority of Indians for insurance purposes. An unexpected tragedy can happen in anyone’s life and life insurance policies are one of the best tools to lessen the financial burden in such circumstances. You also have the peace of mind knowing well that your family will be financially secure to an extent even after you are not around.

Life insurance is basically a contract between the Policyholder and an insurance company. When you are insured, the insurance company pays the Insured amount to the designated Beneficiary in your family after your death.

Life insurance plans are offered by various private and public sector life insurance companies in India, the most popular being the state owned Life Insurance Corporation (LIC) of India. All of these companies provide a lot of benefits to the customers in terms of:

life cover options

wealth multiplication opportunities

children’s future preparation options

retirement preparation options

all of the above combined with tax benefits

As a matter of fact, the tax saving feature of these policies makes them a preferred tool with professionals and investors. With life insurance policies, you are offered a tax rebate upto Rs 150,000 under Section 80CC and 80CCE of the Income Tax Act,1961.

Features of Life Insurance Policies

The life insurance policies have many features that you need to know to make the best use of them and save taxes. The following are the salient features of these plans:

Conditional on certain provisions, the Premium you pay for a life insurance Policy are entitled for deduction under Section 80C of the Income Tax Act.

The tax benefits are available to :

an individual assessee or

a Hindu Undivided Family (HUF) assessee

Various taxes such as service tax, education cess and so on that are present under the existing tax laws affect the premiums and charges of your life insurance policy.

A tax calculator is the best tool that will help you calculate your taxes based on your age, tax slabs, personal choices and social obligations.

Tax planning is therefore very important for your own financial development as it helps to reduce your income tax burden. Tax saving also guarantees a better future for you and your family due to necessary savings in extremely safe government approved schemes. You must therefore save tax through wise tax planning and choose the best investment options to maximize your savings. Life insurance plans are thus one of the best ways to save taxes. You must choose your investment options keeping in mind that what you get after paying taxes is the highest possible amount ensuring safety and liquidity.