Tax-Saving Benefits of Various Insurance Policies

Taxes are a huge cause of worry for everyone. However, you can always minimise the burden of your taxes by making the right investments. The Income Tax Act, 1961, offers all taxpayers specific exemptions on eligible investments. Some of these investments include tax-saving mutual funds, fixed deposits, pension plans, PPF, as well as life insurance policies.

 

Additionally, the tax department provides specific exemptions for different insurance plans, such as life insurance policies and health care insurance. Irrespective of the type of insurance you choose, as an investment, all insurance policies serve three effective purposes. They offer you tax advantages, provide financial security against uncertainties, and also help you to build your corpus.

 

Here is everything you should know about the tax benefits of life insurance policies:

Which insurance is tax-deductible?
 

Insurance policies in this day and age are a must. And to increase their value and improve its adaption, the government offers tax advantages for these insurance plans:

  • Life Insurance policies
  • Health insurance policies
 
What are the tax benefits under life insurance policies?
 

 

According to the Income Tax Act, 1961, each life insurance plan offers tax exemptions up to a specific limit under different sections of the act. The tax benefits for different insurance plans are:

 

Life Insurance Policies

Life insurance policies are the primary insurance plans that people generally invest in to get financial security for themselves and their family against an uncertain event in the future. In this policy, the insurance company promises to pay a specific amount (also called sum assured) to your nominee in case of your death during the term of the plan. However, if you survive the duration of the policy, some specific insurance plans like endowment plans, money-back plans and whole life insurance policies, give you a maturity value benefit. 

 

 Tax benefits of life insurance policies

 

Section 80C

All life insurance policies are eligible for tax exemption under Section 80C of the Income Tax Act, 1961. You get life insurance premium tax benefit on a life insurance policy, endowment plan, whole life insurance plans, money back policies, term insurances, as well as Unit Linked Insurance Plans (ULIPs). In addition, the following conditions apply:

  • The maximum deduction given under this section is up to ₹1.5 lakhs.
  • Tax exemption is given for premiums paid on insurance policies taken for self, spouse, dependent children, and in some cases dependent parents.

Section 80CCC

This section provides an exemption for any amount paid in annuity plan of Life Insurance Corporation of India or any other insurance company to secure a pension. The maximum deduction under this section is also up to ₹1.5 lakhs.

Section 10(10D)

Under this section, the amount you receive from the insurance company is fully exempt from income tax, subject to some conditions. The exemption applies to the receipt of sum assured, bonus, maturity value, surrender value and the death benefit.

 

That said, you must note that if you cancel or withdraw any of the tax-exempted life insurance plans before the expiry of five years, the deductions will stand cancelled. Your deductions will be included back in your income in the year of policy cancellation, and you would pay taxes accordingly.

 

  • For 80C, your total premiums in a financial year should not exceed 10% of the sum assured.
  • In the case of Section 10(10D), tax exemption is also subject to not more than 10% of the sum assured.

 

What are the tax benefits under health insurance policies?

 

 

Health Insurance Policies
 

A health insurance plan is an important constituent of your insurance portfolio. Given the rising medical costs and risk factors, health insurance policies have become more of a necessity than a choice. Health insurance policies provide you and your family financial protection in case of any medical emergencies. These policies provide extensive health coverage only and do not secure you against any other uncertainty. However, even these plans are eligible for tax exemption under the Income Tax Act, 1961.

 

 Tax benefits of health insurance policies
 

Section

Members Insured

Deduction

80D

Self and family

(age below 60 years)

Up to ₹25,000

80D

Self and family + parents (age below 60 years)

Total up to ₹50,000 (25,000+25,000)

80D

Self and family + parents (above 60 years of age)

Total up to ₹75,000 (25,000+50,000)

80D

Self and family (anyone above 60 years) + parents (over 60 years)

Total up to ₹1,00,000 (50,000 + 50,000)

80U

Self with disability

Up to ₹75,000

Up to ₹1.25 lakhs in case of severe disability

80DD

Any dependent family member (of any age) with disability

Up to ₹75,000

Up to ₹1.25 lakhs in case of severe disability

80DDB

Self or dependent family member (below 60 years of age) with a specific disease

Up to ₹40,000

80DDB

Self or dependent family member (above 60 years of age) with a specific disease

Up to ₹1,00,000

 

  • The specific disease is neurological issues, chronic kidney failure, cancer, AIDS and hematological disorders.
  • A deduction of ₹5,000 is given for preventive medical check-ups within these tax limits. 
  • You can claim the exemption even for riders and add-ons of insurance plans, except for personal accident policies or riders. 
Choose TATA AIA tax-saving# insurance plans

TATA AIA understand your concern regarding taxes, and offers a range of savings-cum-life insurance plans that help you save taxes#, insure your life, protect your family’s future, and also build your corpus. 

 

Savings Solutions – Savings-cum-Life Insurance Plans

 

 

Each of these plans offers life insurance income tax exemption# and offer a different financial security benefit. Understand your needs and choose an insurance plan that best fits your requirements.

 

L&C/Advt/2021/Mar/0304

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Disclaimer

# Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

* Insurance cover is available under the products. 

* The products are underwritten by Tata AIA Life Insurance Company Limited. The plans are not guaranteed issuance plans, and they will be subject to the Company’s underwriting and acceptance.

 

  • This document is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. This document is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

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Every effort is made to ensure that all information contained in this document is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.