Although life insurance is a great tool when calamity hits hard, most of us don’t really get it for that reason. Why most people buy a life insurance policy is because of its tax exemptions. Since there are some real benefits hidden behind these plans we are here to discuss the various kinds of tax benefits that you can get by buying a life insurance policy.
Here are a few of the important points pertaining to the deductions under section 80C of the Income Tax Act, 1961.
● Tax deductions under 80C are available for Hindu Undivided Families and individuals.
● The premium paid for a Life Insurance Policy is eligible to get a tax deduction up to a maximum of Rs.1,50,000
● For policies issued before 31st March 2012, deductions are only applicable if the amount of the premium paid in a year is 20% of the sum assured amount of the policy.
● For policies issued after 1st April 2012, the deductions are applicable if the amount paid in a year is 10% of the sum assured amount of the policy.
● If the insurer voluntarily surrenders his life insurance policy or if the policy is terminated before 2 years from the start of the policy, then the insured will not receive any benefits of the premium paid under the act.
Here are a few important points about deductions under section 10(10D) of Income Tax Act, 1961
● The sum assured plus the bonus paid during surrender or maturity of the insurance policy or in the case of the death of the person insured is entirely tax-free for the receiver.
● Any amount paid to the insured under life-insurance policy is applicable for tax deductions. The amount paid can be of the following nature.
- Allocated sum by way of bonus
- Maturity benefit
- Survival benefit
- Death benefit
- Surrender value
● Section 10(10D) deduction is also applicable in case of gains and proceeds from a ULIP.
● Tax benefit on the maturity proceeds is offered when the premium paid is not more than 10% of the sum assured.
● The maturity amount or any bonus received by the beneficiary in case of demise of the insured is fully exempted from the tax deduction.
● Life insurance for disabled people is eligible for tax exemption under section 80DDB if the amount of the premium exceeds 15% of the sum assured amount.
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