The Government of India works hard to ensure the country functions like a well-oiled machine. They take vital steps towards building the country and providing their citizens with the appropriate resources. To maintain these functionalities, the government levies a tax on the citizens that fit the tax bracket, called the income tax. Individuals falling in the tax bracket will have to make sure they file their returns and make the payments. The Government has also introduced provisions that allow taxpayers to opt for investments that help them reduce the amount they pay through taxes. 
 

As a taxpayer, you must be mindful about how much you are paying as income tax. This is why when you file for tax returns, you must consider learning about tax saving.
 

What is Tax-Saving in India?
 

Many individuals are joining the workforce every year and are introduced to the country's taxation system. These individuals include young graduates who have just begun their lives in the workforce. They are first-time taxpayers entering into their careers and hence do not have a high income to be worried about. They must understand that an annual income of ₹2.5 Lakh is completely exempted from tax under our tax system. 
 

One of the things that individuals from the workforce forget is that as they advance in their career, their income rises. With an increased income, the tax liabilities on the individual increases as well. This is why it is important to look for different tax saving options while working.
 

Benefits of tax saving:
 

1. Including different tax-saving instruments in their portfolio helps the individual plan for their future accordingly. It also provides a long tenure for investments to start providing decent returns for the time you will need it the most. It is particularly important for market-linked tax-saving investments like ELSS, specific tax-saving funds and tax-saving deposits. 

2. Tax saving also helps the individual build a healthy financial habit where they'll save a portion of their investments, helping them save taxes and protect their finances. 

3. Most tax-saving instruments not only help you save on taxes but also come with other benefits.

4. Some of the tax-saving plans are government-backed, which means they're legitimate, dependable and transparent investments.   

5. The Income Tax Act also lists sections like Section 80C, Section 80D, Section 10(10D) that promote tax saving instruments. 
    

What is Section 10 (10D)?
 

This Section of the Indian Income Tax Act (ITA) lays out rules about the taxability of the claims. Individuals can benefit from Section 10(10D) tax exemptions if the premium paid on a policy in a single year is not more than 20% of the sum assured for policies issued before 1^st April 2012 and not more than 10% for policy issued after 1^st April 2012. Through in this Section, the claims like death benefit and maturity benefit or any other bonuses² accumulated from a life insurance plan are not taxed subject to applicable condition of prevailing tax^* laws. 
 

For instance, an individual has purchased the term life insurance policy and has named a close relative or loved one as their beneficiary. If the individual passes away, a death benefit is provided to the individual's beneficiary. The lump-sum obtained by the relative may seem like an additional income, but it will not be considered as one as per Section 10 (10D).
 

Section 10(10D) ensures that the money received as a death benefit under a life insurance policy is not seen as income and will be exempt from the income calculation for taxation. 
 

The benefits of Section10(10D) from the ITA can be applied to gains obtained from Single Premium Life Insurance Policies and Unit-Linked Insurance Plan (ULIP). This Section allows policyholders to protect the sum assured as they are an integral part of a policy.  
 

Tax-Saving Under Section 10 (10D):
 

Section 10(10D) tax benefits from the Income Tax Act can be obtained only if the conditions listed below are met:
 

1. The tax deduction under this Section is applicable on any returns obtained from an insurance plan, i.e., Maturity or Death benefit. It will also include any bonuses² gained from life insurance policies subject to applicable conditions of prevailing tax^* laws. 

2. Any payout which is not eligible for tax deductions under Keyman Insurance Policy will be eligible for tax deductions under this Section. 

3. Premiums paid in a particular year during the policy term must not go over 20% of the sum assured for insurance plans purchased between 1st April 2003 and 31st March 2012. 

4. For any policies purchased after 1st April 2012, the premium amounts must not be over 10% of the sum assured. 

5. Insurance premiums for any year during the policy tenure should not go over 15% of the Sum Assured. Along with this, the plan must not have been bought on or after 1st April 2013. Along with this, the policy must be purchased for any individual who meets the criteria listed below:
    

   • Any individual with a disability or a severe disability, as mentioned under Section 80U of the Income Tax Act, 1961. 
      

   • Diagnosed with a disease as mentioned under Section 80DDB of the Income Tax Act.
     
      

Life Insurance and Section 10 (10D):
 

Life insurance policies function as financial protection for you and your family by providing you with a lump sum benefit to meet medical and personal expenses. They are especially advantageous for taking care of unforeseen emergencies. The financial corpus helps you to focus entirely on your needs at hand, while the insurance company will handle the financial requirements. 
 

Along with the insurance coverage that beneficiaries get through these plans, they can also opt for further advantages through the tax^* deductions under Section 10(10D) of the Income Tax Act.

Section 10(10D) benefit helps the policyholder by providing tax deductions on the policy payouts (maturity and death benefit). These exemption include all forms of accumulated bonuses² for the respective life insurance policies. The tax exemptions under the Section can be opted for on all types of life insurance policy claims subject to applicable conditions. Along with this, there is no upper limit on the claims. 
 

Tax-Saving with TATA AIA Life Insurance
 

Tata AIA offers a host of life insurance policies under:
 

1. Protection Solutions – Term life insurance policies

2. Savings Solutions – Life Insurance savings plans

3. Wealth Solutions– Unit Linked Insurance Plans

4. Retirement Solutions– Monthly Income and Annuity Plans
    

All these plans offer tax^* benefits under Section 80C and Section 10 (10D) of the Income Tax Act as per the prevailing tax norms.

 

Summing Up
 

When you've purchased a life insurance policy, you can claim for tax exemption under Section 10(10D). As per this Section from the Income Tax Law, life insurance policyholders can get tax^* benefits. These benefits are provided on the returns obtained from an insurance plan and any bonuses² gotten from the plan.
 

Tata AIA offers a range of life insurance plans with tax^* benefits. For more information, you can visit the website and read about the plans and their benefits in detail.

 

  L&C/Advt/2023/Mar/0989