Life insurance tax benefits not only help a person save tax but also helps him in attaining financial security. Various tax benefits for life insurance policy holders are:
- Section 80C
Under the Section 80C of Income Tax Act, 1961, individuals and members of HUF or Hindu Undivided family can claim tax exemption for a maximum amount of 1,50,000. It is applicable only on 20% of the total life insurance amount. The maximum tax deduction one can avail in a financial year is up to Rs. 1.5 Lakhs. It can be taken in the name of any of the family members that may also include spouses and children (under 18).
You can claim the deduction for premium paid towards life insurance policies of yourself, your spouse and the dependent children.
- Section 10 (10D)- Section 10 (10D) of the Income Tax Act, 1961 ensures that the dependant who receives the lump amount in case of death of the policyholder gets the money without any tax deductions.
Those who do not get any benefit due to Keyman Insurance Policy can benefit from this section.
Keyman Insurance Policy: In this type of policy, the policy provider is an employer and the policy buyer is the employee or the Keyman. The benefit of such a policy goes to the employer.A key point of Section 10 (10D) is that there is no upper limit on the tax exemption like Section 80C.
- Section 80 DD- This tax exemption benefits a disabled dependant of the policyholder. Tax deductions are allowed not exceeding Rs. 50,000 per annum. If the person has severe disability, tax exemptions may be given not exceeding Rs. 70,000.
This section can also act like a medical insurance. It helps in case of emergency medical insurance and can be used at times of critical illnesses. The maximum tax deduction allowed is 20,000 for people below 60 years and 50,000 for people above 60 years (senior citizens).
You can claim the deduction for premium paid towards life insurance policies of yourself, your spouse, dependent children and parents, irrespective of whether or not they are dependent on the policy holder.
It is evident that the government wants people to get insurance tax benefit and avail life insurance and medical coverage. Tax exemptions help people profit from policies and get the maximum return on investment.
Learn more about different Term Insurance Plans here.
* Terms & conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
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