While one should first understand their insurance needs before purchasing life insurance rather than selecting it as a last-minute tax-saving instrument, the tax benefits are an added incentive. So, how does life insurance help you save taxes?
What are the different sections under which you can claim tax deductions? Let us have a look-
1.Section 80CUnder Section 80C of the IT Act, the premium paid for traditional whole life insurance or ULIP is eligible for tax deductions of up to Rs. 1.5 lakhs in a financial year. However, the premium paid in the financial year should not be more than 10% of the assured sum. So, if your life insurance policy’s assured sum is Rs. 10 lakhs, the premium paid in a year should not be more than Rs. 1 lakh
2.Section 80CCCIf you have purchased an annuity or pension plan, premiums of up to Rs. 1.5 lakhs paid in a financial year are eligible for tax deductions under Section 80CCC. This rule only came into effect in 2016-17. However, the deductions under Section 80CCC are not over and above Section 80C. The combined deductions under both sections are up to Rs. 1.5 lakhs max
3.Section 80DSection 80D deals with health insurance. However, if your life insurance has riders or add-ons such as surgical care, critical illness, and hospital care, you can take advantage of this section. Under this section, you can claim deductions of up to Rs. 25,000 in a financial year. However, if the premiums are paid towards the life insurance policy taken for a senior citizen, the deduction limit is up to Rs. 30,000
Are the Deductions Only Available for a Policy Purchased for Self?No, you can claim tax deductions under these sections for life insurance policies purchased for yourself, your spouse, and even dependent children. In the case of Section 80D, even the premiums paid for a policy purchased for your dependent or independent parents are eligible for tax deductions.
Ensure Financial Security of Your Family and Save Taxes with Life InsuranceLife insurance allows you to save taxes while also securing your family. Consult with the insurance provider or a tax advisor to know more about these sections and save as much of your hard-earned money as possible.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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