If you are a salaried employee, saving tax is mandatory. You need to ensure that you make enough investments to meet the tax ceiling of Rs 1.50 lakhs.
If you have already done your tax planning, then there is nothing to worry about. However if you are yet to do it, here are some plans that will help you out.
Life insurance offers multiple products, such as term insurance, endowment insurance, money-back policies, whole life policies, and ULIPs.
While term insurance offers complete insurance protection without any maturity benefits, others are a mix of insurance and investment.
However, for tax calculation purposes, all these insurance policies are treated equally by the Income Tax Department.
Here are the details:
- Eligibility: Any individual can claim tax benefits under Section 80C of the Income Tax Act on life insurance policies bought in your own name, spouse and children.
- Maximum deduction: Rs 1.5 lakh
- Minimum sum assured: For availing tax benefits, sum assured should be 10 times of the premium paid.
- Mode of payment: Insurance premiums paid via cheque, online transfer or any other mode,except cash,are eligible for tax deduction.
- Policy surrender before maturity: If you surrender the insurance policy before its maturity date, the taxable amount would depend on the number of premiums paid. If you have paid at least five premiums, it would be zero. Else, the surrender value will be added to the total income and taxed accordingly.
- Maturity amount: Maturity proceedings are completely tax-free.
Also called pension plans, there are two phases in retirement plans— accumulation and withdrawal.Tax benefits are only available during the accumulation phase when you pay premium. There are three cases wherein taxation comes into consideration:
- Upon death of the policyholder
The proceedings paid by the insurer to the nominee after the death of the policyholder are tax free under Section 10(10D).
- Policy surrender before maturity
Surrendering the policy before maturity has tax implications. The entire surrender value will be added to your income and tax will be levied according to the tax slabs.
- Upon maturity
Of the total maturity amount, only 1/3rdis tax free.The remainder will be paid to the policyholderin the form of pension which is treated as a separate income and is taxable.
Health Insurance Policies
The ever-risingcost of medical bills has made health insurance a must. Adding to it, the policyoffers tax benefits under Section 80D of the Income Tax Act.
The available tax benefits are as follows:
1) For Senior Citizens
- Under Section 80D: Health insurance premiums paid by senior citizens get tax deduction of up toRs 30,000.
- Tax deduction for super senior citizens: For uninsured super senior citizens of 80 years or above, tax deduction of up toRs 30,000 is given on total medical expenses.
- Under Section 80DDB: Medical expenses incurred on specific diseases, such as cancer, are eligible for tax deductions of up toRs 80,000.
- Mode of premium payment: Tax benefits are available only on the premium paid via cheque or online transfer.Premium paid via cash is not eligible for deduction.
2) For Individuals
- Under Section 80D: Premiums for insuring the health of self, spouse and dependent children are eligible for tax benefits for up to Rs 25,000.Further, upon paying for parent’s health insurance policies,you are eligible to get maximum tax deduction of upto Rs 25,000. If at least one parent is above 60years of age, the maximum limit is Rs 30,000.
- Expenditure on preventive health check-up: A tax deduction of Rs 5,000 is allowed on preventive health check-ups for self, spouse, dependent children and parents.
3) For the specially-abled
Any person who has been certified by a medical practitioner as a person who is specially-abled is allowed to claim deductions under Section 80U.
Also, if a person incurs any medical expenses for the treatment of a specially-abled dependent, they would be eligible for tax benefits under Section 80DD. The tax benefit is as follows:-
|Disabled (a person with 40% disability)||Rs 75,000|
|Severely Disabled (a person with 80% disability)||Rs 1,25,000|
Curated from How to Save Tax through Insurance Policies?