Along with the usual benefits you are going to get through the Term insurance plan, there are additional benefits associated with it, which you might not know. The term insurance plans offer you a tax saving on your annual income. You just pay for the premiums for the term insurance and there an exemption up to 1.5 lakhs on the premium payments.
People generally do not plan their financial year well by rushing towards an investment at the end of the year to save tax. You do not have to do that and invite loss. You need to understand your financial protection need more than your tax savings. Every person needs to be insured in his lifetime. The term Insurance acts a constant source of income for your family when you will not be around. So why not spend in an insurance plan with low premium term insurance plan that you will not feel like paying. At the same time, you save all the money you paid towards the insurance from tax exemption.
According to the government of India, Term insurance plan qualify for a tax exemption under the section 80 C of the income tax act, 1961. You can claim up to INR 1.5 lakhs towards your premium payment.
How to Save Tax in Term Insurance Plans
If you are planning to buy a tax saving product, you should go for term insurance plan. Along with the coverage of your life, in case of any unfortunate incident to your family, it also offers you to save some taxes by paying for premiums. Under the section 80C and 10D of income tax act, 1961, Term insurance provides tax benefits for your plan.
You buy a term Insurance and pay for the premium as per the coverage and according to your age. If you are working for an organization or for yourself, at the end of the year, when you pay for your taxes, the premium amount will be reduced from the total taxable income. You can claim up to INR 1.5 lakhs for our insurance payment. As the tax will be calculated as a percentage of your income, the more the taxable income is, the more tax you are going to pay. Tax exemption on your premium can save you up to INR 50,000 rupees in a year.
However, there are some clauses to keep in mind for tax reduction. Under 80 C, Tax reduction is applicable only if the annual insurance payment is not more than 10% of the sum assured. If you are suffering from any illness or disability, the tax reduction is applicable for premiums up to 15% of the sum assured.
Under 10 (10D), If a policy is issued after April 2003, Tax exemption is not applicable for premium payment more than 20% of the sum assured. If the policy is issued after April 2012, Tax exemptions will not be applicable for annual insurance pay more than 10% of the sum assured.
Tax Saving Benefits of Term Insurance Plans
Saving some more taxes every year will be there in everyone’s mind since the beginning of the year. Without understanding the uses, people buy insurance products with high premium payment. At a later point in time, they realize that it is not going to save you huge amount from taxes.
The best idea to save taxes along with less premium payment is to go for Term insurance plans. It comes with a lifelong coverage for you and your family. At the same time, you can deduct the premium payments from the total taxable income. Saving tax meaning is that you are going to spend that money in other productive ways. After Government of India has passed the Income tax act, it is favorable to go for the term insurance as an investment option. It is not that you will get only a few choices to select from the available insurance plans and compromise with your choice, it is more than that. There are several insurance providers with best plans and offering discounts on the premiums and in return offer you a lump sum amount of money to protect your family.
Choosing a Term insurance plan is a right choice for someone, who wants to protect his/her family at the same time wants to spend less on the insurance premium payments. Not only is it good for financial protection in the future. It also offers you tax savings on the premium payments. With numerous term insurance plan, it is important to choose the best one to get the highest benefit out of it. Thus, you can compare the same on Coverfox.com and then choose the plan which meets your requirement and gives you the best cost-benefit option.