Life Insurance Made Easy
Tax Edge
Life insurance is not just about protection, savings, and investments; there
are also tax benefits to be claimed on the premiums paid and on maturity
T
he manifold
benefits of a
life insurance
policy are
well documented:
protection, savings, and
investments. A feature
that sets life insurance
apart from other
financial instruments is
the tax benefits that one
can claim. So, when you
pay the premium towards
your life insurance
cover, you can claim tax
benefits under Section
80C of Income Tax Act,
up to a maximum sum
of `1.5 lakh.
The benefits under
Section 80C exist only
if the policy has been
in force for at least five
years, because if the
policy is terminated
within five years, the
deductions are added
to income and taxed
accordingly.
The condition to
claim tax benefit is that
the sum assured has to
be at least 10 times the
annual premium being
paid. For instance, if
the sum assured is `15
lakh and the annual
premium paid is less
than `1.5 lakh, then the
entire amount can be
claimed as deduction
under Section 80C. If the
premium is more than 10
per cent, say `2 lakh for
the same sum assured,
Advantage
Premiums paid towards servicing a life insurance
policy qualify for tax deductions under Section
80C of the Income Tax Act
The maximum deduction that can be claimed
under Section 80C is `1.5 lakh
Tax-free proceeds on maturity/death under
Section 10(D) are subject to conditions
mentioned therein.
Premiums towards health riders like critical
illness qualify for tax deductions under
Section 80D
Premiums up to `30,000 for senior citizens and
`25,000 for others are eligible for tax benefit.
attached to your base
life insurance. Health
insurance offers tax
benefits under Section
80D, wherein premiums
up to `30,000 for senior
citizens and `25,000 for
others are eligible for
tax benefits. Remember
that regardless of its
nature, life insurance not
only helps you meet the
financial needs at every
stage in life but also
offers tax benefits; a trait
that makes it useful to
align financial goals and
tax savings.
[email protected]
then the deduction
amount is capped at
`1 lakh. However, for
policies purchased
before April 1, 2012, the
premium to sum assured
should not exceed 20 per
cent for the proceeds to
be tax-free.
There are also tax
benefits to be claimed
in case of maturity of
a life policy or in case
of a death claim. Under
Section 10(10) D, the
proceeds from maturity/
death are tax free
subject to conditions
mentioned therein.
Additionally, there
are also tax benefits
to be claimed through
health riders like
critical illness when
www.outlookmoney.com December 2017 Outlook Money
25