The multifaceted advantages of life insurance policies are sometime misconstrued and not appreciated as much as they should be. For instance, the flexibility to choose the scope of cover tenure of the policy and the premium you pay are some variable features. Likewise, there are various tax benefits that come at the time of taking life insurance policies which you should be aware of to make the most of these products (See: Claim these tax breaks).
One of the biggest benefits of life insurance plans is the exempt-exempt-exempt (EEE) category that it falls under. This means that you can claim tax deductions when paying premiums, the gains you earn on participatory policies are also exempt from tax and at the time of maturity or death, the policy proceeds are exempt from taxes. Moreover, if you include health related riders to your insurance plan, you not only enhance the scope of insurance, you also get additional tax benefits.
Claim these tax breaks
Premium on life insurance policies:
Claim deductions under Section 80C from your taxable income. Deduction is restricted to 10 per cent of the minimum capital sum assured or premium paid, whichever is lower. The overall limit of deduction available under section 80C is Rs1.5 lakh.
Premium on pension policies:
Claim deductions under Section 80C from your taxable income up to Rs1.5 lakh under Section 80CCC.
Health rider:
Premium paid on health insurance policies, including health riders, qualify for deduction of premium on a policy taken for self, spouse, dependent children and parents. Deduction of Rs25,000 is allowed for self, spouse and dependent children. This goes up to Rs30,000 if the age of insured is 60 years or more. If you have senior citizen parents, additional deduction of Rs25,000 towards health insurance premium paid for covering parents, which goes up to Rs30,000 if their age is 60 years or more.
Policy proceeds:
Proceeds from life insurance policies are exempt subject to conditions of section 10(10D) on death claims as well as policies that have matured. Under Section 10(10A), payment received on commutation of a pension policy is exempt from tax.
olmdesk@outlookindia.com