Life Insurance Tax Benefits in India

How To Make The Most Of Tax Benefits From Life Insurance?

Tax Benefits Under Section 80C

The Income Tax Act has a Section 80C which is one of the most popular tax-saving options available. It allows deductions of up to ₹1.5 lakh per annum on premiums paid towards life insurance policies. Here are a couple of things to remember:

The policy must be in the name of the taxpayer, spouse, or children.

Deductions are applicable for policies from any life insurance company approved by IRDAI.

Tax Exemption Under Section 10(10D)

Under Section 10(10D), the maturity proceeds subject to certain conditions, and death benefits received from a life insurance policy are tax-free. This is a significant tax exemption for life insurance that ensures you receive the full benefits of your policy.

Some of the conditions for exemption include:

The premium should not exceed 10% of the sum assured, if the policy is issued on or after April 1, 2012.

For policies issued before April 1, 2012, the premium should not exceed 20% of the sum assured.

For policies issued on or after April 1, 2013 to a person who is suffering from disability or a particular disease , the premium should not exceed 15% of the sum assured.

Health Insurance and Critical Illness Riders

Adding health insurance or critical illness riders to your life insurance policy not only provides additional coverage but also offers tax benefits under Section 80D of Income-tax Act, 1961 subject to limit and terms and conditions as prescribed therein. Premiums paid for these riders can be claimed as deductions, further enhancing your tax-saving options.

Using an Income Tax Calculator

A valuable tool in planning your tax-saving strategy, an income tax calculator can help you understand how much you can save through various tax-saving options, including life insurance policies. By inputting your income, investments, and eligible deductions, you can get a clear picture of your tax liabilities and potential savings.

When selecting a life insurance policy, consider the tax benefits it offers. However, do not forget that tax benefits need not be the primary goal of getting a policy. The best insurance policy for tax benefits should align with your financial goals while maximising your tax savings.

** Tax exemptions are as per applicable tax laws from time to time.

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