Term insurance is a great investment option for those who are looking for ways to save tax. There are several benefits for a policyholder of aplan. All these plans offer tax-saving options as per Section 80C of the Income Tax Act 1961. Also, policyholders can avail of deductions under Section 10 (10) D on the amount they receive as a maturity benefit from the policy.
Tax benefits under Section 80C
A policyholder can claim tax benefits according to Section 80C for the premium paid on the policy. Individuals and Hindu Undivided Families (HUFs) are eligible for the deduction under the section. Tax benefits are available for the premium paid for self, spouse, and children. Any member of the HUF is eligible to receive the tax benefits under the section.
The tax benefit can be claimed on the premium of up to 20% of the total assured amount if the amount of premium paid is more than 20% of the agreed assured amount. If the premium paid by the assessee is not more than 10% of the assured amount, the assessee can claim tax benefits if the policy is issued on or after April 1, 2012. Anyone with severe disabilities can claim a tax benefit if the amount of premium paid by him is not more than 10% of the assured amount if the policy is issued on or after April 1, 2012.
The maximum amount of deduction that an assessee can claim is INR 1.5 lakh for a financial year.
Tax benefits under Section 10 (10D)
According to Section 10 (10D), a policyholder is eligible to receive an exemption on term insurance. Any amount that is received from the insurance company, including the bonus, will remain tax-free. However, this rule will not apply to the amount received under Section 80DD (3), the sum received via a Keyman insurance policy, and the amount received under any insurance plan issued before April 1, 2003 later. Still, there is an exception of death benefits.
Tax rules in case of death benefits
Any death benefit received by the nominees of the policyholder is also tax-free. However, when the policies have been issued after 1st April 2003, the policyholder will not claim a benefit as per Section 10 (10D) if the premium paid for any year is more than 20% of the total amount assured.
Keep these tax benefits in mind and buy a term plan online. It will give you a cover for your life and reduce your tax liability significantly.