We are often told that life insurance is a must have security so that one is able to provide for his/her family to meet future needs and uncertainties. Choice of policy would depend on your personal requirement and other factors namely your age future financial commitment, income level, and so on. But there is one more very important reason to go for a Life Insurance beside financial cover. It is an excellent tax saving instrument according to the income-tax benefits available under the Income Tax Act, 1961 (The Act).
Tax benefits:
- Relating to payment of the life insurance premium
- Regarding the sum received under the Life Insurance Policy on maturity or in case of occurrence of a certain incident.
1. You can claim a deduction under section 80C of the Act for life insurance premium paid by you during a financial year (that is 1st April to 31st March). The maximum claim can not however exceed Rs.1 lac. This deduction is available to an individual or to the Hindu Undivided Family (or HUF). For an individual, the deduction can be claimed in respect of the premium paid for life insurance for self, spouse and any child of such individual and for a HUF, in relation to the premium payable on behalf of any member of the family.
2. According to the section 10(10D) of the Act, any amount received under a life insurance policy, including bonus paid on such a policy is exempt from income-tax, (subject to specified conditions). But, the sum received under a key man Insurance Policy is taxable. Also, the claim proceeds received by dependent(s) or nominee(s) of the policyholder after his/her death is not taxable under the Income-Tax Act.
Important to remember
Any amount received under insurance policy issued on or after 1st April 2003, for which, the premium payable for any of the years during the term of the policy exceeds 20% of the capital sum assured, is taxable. But the sum received on death of the policyholder is still exempt from tax.
Bottom Line
Statistics reveal that people spend more obtaining an Auto Insurance that a personal insurance. This could be because auto insurance is compulsory and life insurance isn’t.
But if you are the bread winner of the family you know how that life insurance is of utmost priority for financial security of your family members. It is an investment which with affordable premium can provide a large amount of life insurance cover.
Do provide for your family even after you can no longer do so by planning in advance. In times of need, the investments that you make are going to support and make it a little easier to shoulder the financial burden. And remember there is always the benefit of tax saving. So go for life insurance…
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