Saving Tax by Investing in Different Insurance Products

There are two components of financial planning. The first is to generate more money through increasing income, savings, and investments, the second is to maximise these savings by lowering the tax output. Keeping your eye on the final result is important.

Different types of insurance plans can help you reduce your tax outgo, depending on your income, existing tax laws and the nature of insurance plan that you purchase. 

Find out different types of insurance policies that qualify for a tax deduction under Section 80C of the Income Tax Act, 1961. 

• Term insurance

A term insurance plan is one of the most affordable life insurance products. These plans offer financial protection to the family or loved ones, in the case of an unfortunate event to the insured, during the policy term.  Term insurance offers a high sum assured. However, the monetary benefits do not stop there.

The term insurance tax benefit under Section 80C enables you to claim a tax deduction of up to Rs. 1.5 lakh per annum, subject to the provisions of the said section.

In addition to this, insurance payout given to the nominee on the premature demise of the policyholder is completely tax-free under Section 10 (10D).

Riders like the critical illness rider that can be added to term insurance also qualify for a tax deduction under Section 80D. 

For further clarity on tax benefit please consult your tax expert.

Term life insurance is a must-have financial tool for the chief-earning members of the family, women, and anyone else who wishes to leave behind a legacy.

• Unit Linked Insurance Plan

ULIP insurance is one of the best insurance products if you wish to combine a healthy return from investment with financial security for your loved ones. ULIPs offer a life cover along with the option to invest your money in the funds of your choice. You can choose from equity, debt, or hybrid funds based on your risk appetite and goals and plan for your future financial needs. ULIP tax benefits include a tax deduction of up to Rs. 1.5 lakh per annum under Section 80C. In addition to this, ULIP proceeds are exempted from tax if the policy is compliant to the provision of Sec 10(10)(D) of the Income Tax Act, 1961.

A ULIP can be a multi-purpose investment tool that can be used to save for your child’s future needs, your retirement, and many other similar goals. 

• Traditional Savings Life insurance policy

Endowment plans are essentially traditional savings life insurance policies. An endowment plan is typically an insurance savings plan that offers a life cover along with a savings component. Endowment insurance offers guaranteed income at maturity, so you have a savings fund for the future. Like other insurance products, endowment insurance also offers a tax deduction of up to Rs. 1.5 lakh per annum under Section 80C.  The proceeds of the policy are exempted from tax, if the policy is compliant to the provisions of Sec 10(10)(D) of the Income Tax Act, 1961.

For further clarification, please consult a tax expert.

Endowment insurance plans are low-risk plans that are not linked to the market, so they are ideal for risk-averse investors looking for a risk-free financial protection tool.  

Conclusion

All these types of insurance plans are great for tax savings as they help you lower your expense and maximise your returns. Moreover, they help you secure your future as well as that of your loved ones financially. 

Frequently Asked Questions (FAQs)

How many types of insurance plans can you buy in India?

You can purchase the following types of insurance products in India:

• Term insurance
• Term life insurance with return of premium
• Unit-linked Insurance plan
• Traditional Savings insurance policy
  • Non-Participating Savings Insurance Plan
  • Participating Savings Insurance Plan
• Retirement plans
• Child Plans
• Health Plans

And more

Which insurance is best for tax benefits?

All insurance plans can offer tax benefits. So, you can choose any based on your goals, risk appetite, and future needs.

To get a detailed understanding on life insurance product offerings that will bring tax efficiency to your financial planning, we request you to fill out your details here and one of our experienced advisors will call you back. We urge you to please consult a tax expert before investing.

Disclaimer: http://bit.ly/2GZeRHI

Visit Us: https://www.reliancenipponlife.com/

Mktg/SavingTaxUnderSection80C/V1/July2022

544 Views