Tax Benefits of Life Insurance Plans
Tax Benefits of Life Insurance Plans â€" Life insurance policies can be useful tax planning tools because the policyholder is eligible for tax benefits under the Income Tax Act 1961 (Act). Though there are multiple modes for saving tax, life insurance is one of the most effective tax planning instruments. Plans from Max Life Insurance can be used for protection, long-term savings, and tax planning. There are two kinds of income tax benefits available to individuals with respect to long term savings being made in Life Insurance policies:
Deductions 1. 80C/80CCC:1. Benefit is available to Individual assessee and Hindu Undivided Family assessee.
a. In case of the individual assessee â€" Himself/herself, spouse, children of such individual
b. In case of HUF assessee â€" any member of HUF
2. If the amount of premium paid in a financial year for a policy is in excess of 20% of the actual capital sum assured, then the deduction will be allowed only for premiums up to 20% of the sum assured.
3. For insurance policies issued on or after April 01, 2012, the deduction is allowed for only so much of the premium payable as does not exceed 10% of the actual capital sum assured. (15% of actual capital sum assured in case of a person with severe disability or specified ailment).
4. Above benefits shall be reversed if the policy is terminated/cease to be in force within 2 years for traditional products and 5 years for ULIP products after the date of commencement of the policy.
5. Sec 80CCE â€" Maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC will be limited to Rs. 150,000.
2. 80D1. Benefit is available to Individual assessee and Hindu Undivided Family assessee.
a. In case of the individual assessee â€" Himself/herself, spouse, dependent children, and parents of such individual
b. In case of HUF assessee â€" any member of HUF
2. The qualifying amounts under Section 80D for self, spouse, and dependent children are up to Rs. 25,000/- and additional deduction up to Rs. 25,000/- for the parents. However, a higher amount of up to Rs. 25,000/- is permitted for parents, if they are senior citizens. Assessee is allowed to make any payment on account of preventive health checkups up to Rs. 5,000 within the prescribed overall limit.
3. 80DDPremiums paid for disabled dependents are eligible for deduction up to Rs. 75,000 every year. A higher deduction of Rs. 1,00,000 shall be allowed, where a such dependent is a person with severe disability.
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