If you are thinking of buying a Life
Insurance policy, then you need to know how to save income tax with the same,
and yes, it is possible! Under the Income Tax Act of 1961, you are eligible to
save tax on your hard-earned money, when you purchase an insurance policy. Not
many people know this, but you can get tax advantages at different stages of
the policy.
Check out the different stages for Life Insurance in India
–
Step 1: Entry Advantage
Tax benefits can be availed on your premium
payments under Section 80C, which is entry advantage that you get for your life
insurance plans
Stage 2: Earnings Advantage
The amount you are saving under section
80C, will not be taxable, and that is where this investment of yours has the
potential to grow and earn you higher returns as well.
Stage 3: Exclusive Switching Advantage
If you are switching your investment
between debt funds, balanced funds, and equity, then these switches are not
taxable. You can make the most of these switches based on the current market
scenario, and increase your profit potential.
Stage 4: Exit Advantage
When you are exiting a Life Insurance plan,
you are entitled to a Maturity benefit, which is the payout you receive when
your policy tenure is over. And, subject to the conditions under Section 10
(10D) of the 1961 Income Tax Act, this amount will be tax-free too.
All these benefits kick in at various
stages of the policy, and hence it is advisable to read up on them in advance,
and then choose an online life insurance plan accordingly. Furthermore, here
are a few of the tax benefits that various sections under the Income Tax Act of
1961 offer:
Section 80C:
Deduction from your taxable income can be claimed on account of the premium
that you are paying towards Life Insurance of India policy for self, spouse, or
children who are dependent. The cap for this deduction is INR 1.5 lakh.
Section 10(10D): The returns you are earning from the Life Insurance plan will be
tax-free under the conditions mentioned in this section. If you qualify, then this
could be an effective way to make your money grow.
Section 80CCC: If you have paid premium up to INR 1.5 lakh towards retirement or
pension policies, then you can claim tax benefits towards the same. However, if
you end up stopping or surrendering the plan, then the annuity or pension you
receive towards the same, will be taxed as per the existing laws.
Section 10(10A): At the time of retirement, 1/3rd of the payment that you receive on
your pension plan, which is known as commutation, is also tax-free.
Section 80CCE: The overall limit of deduction under this section is INR 1.5 lakh.
This is applicable from taxable income, if you are looking to claim tax
benefits under sections 80CCD, 80CCC, and 80C.
