Insurance policies

Wealth Guide: Income Tax – These Insurance Policies Can Help You Save Tax

Most people don’t know that insurance policies can also help reduce taxes. Moreover, with the rising cost of healthcare, everyone needs sufficient insurance coverage or medical coverage. One can avail the benefits of insurance coverage and tax benefits on life and health insurance policies. Ankit Agarwal, co-founder and CEO InsuranceDekho, shares his knowledge on how to save income tax through certain insurance policies.

“Did you know that you can save tax under sections 80C and 80D of the Income Tax Act 1961, by investing in a life or health insurance policy? When you take out a life insurance policy, you will have to pay premiums to qualify for the coverage benefits available under the insurance policy,” said Ankit Agarwal.

Explaining Section 80C, Agarwal said, “Under Section 80C of the Income Tax Act, premiums paid for any life insurance policy are eligible for tax exemptions. Under Section 80C, (along with deductions under Sections 80CCC and 80CCD of the Income Tax Act), tax exemptions of up to Rs. 1.5 Lakh is available for premiums paid for a life insurance policy.

Advising on Section 80D, he added: “Under Section 80D of the Income Tax Act, premiums paid for any health insurance or medical insurance policy are eligible for tax exemptions. Now that you have understood the basics of saving tax by investing in life insurance or health insurance. Let’s try to understand better. This will help you make an informed decision.

Tax exemptions (section 80C) in the context of life insurance

“Life insurance policies provide life coverage to the insured life and provide financial security for their loved ones in the event of the unexpected death of the insured life during the term of the policy. Apart from this, there are several other types of life insurance policies which provide different benefits such as asset appreciation, life cover, help in building a retirement corpus, help in investment in market-linked funds, savings options for children,” he explained.

“Section 80C of the Income Tax Act provides certain conditions regarding tax exemptions on life insurance policies. Under a life insurance policy, the policyholder or the undivided Hindu family can claim tax exemptions on the premiums paid. NRI or foreign nationals who have invested in a life insurance policy in India also enjoy tax exemptions under this section,” he added.

“You can be the policyholder yourself or take out a life insurance policy for your husband/wife, dependents such as parents or children. You can choose to take out a traditional life insurance policy, a term insurance policy or a unit-linked insurance policy, all types of life insurance policies offer tax advantages. The maximum tax exemptions under a life insurance policy are Rs. 1.5 Lakh which includes all insurance possibilities and premiums paid for the life insurance policy. Keep in mind that tax benefits are subject to changes in tax laws,” he added.

Tax Exemptions (Section 80D) under Medicare/Mediclaim Insurance Policy

He explained, “A health insurance policy covers medical expenses that may arise due to illness/accident, medical expenses include hospitalization, medication, consultation fees, etc. benefit from tax exemptions for premiums paid for health insurance or health insurance policies.

“Under this section, certain payments may be exempt, such as health insurance premium, expenses related to health examinations, etc. Tax exemptions are only applicable if the premium paid is other than cash. The value received at maturity from a critical illness insurance policy is also tax-free. the maximum tax exemptions under a health insurance or mediclaim policy is Rs. 25,000,” he added.

Conclusion

“In addition to getting coverage, you can also use a life insurance and health insurance policy to get tax benefits. There are some specific life insurance tax exemptions that you may want to take note of. Under Section 10 (10D) of the Income Tax Act, all proceeds received from a life insurance policy are also eligible for tax exemptions,” he concluded.

(Disclaimer: Opinions/suggestions/advice expressed here in this article are investment experts only. Zee Business suggests its readers consult their investment advisors before making any financial decisions.)