You must purchase life insurance, especially if you are the only provider for your family. You are responsible for providing for the financial stability of your spouse, parents, and kids.
In case something were to happen to you, your loved ones would not only have to deal with the emotional pain but also difficult financial times. Yet, a life insurance policy guarantees your family’s future financial stability. Also, you might benefit from sustainable life insurance tax advantages. A life insurance calculator is a tool you may use online to determine the amount of coverage required based on your needs.
What deductions are available under Section 80C?
It’s untrue if you think you can’t take advantage of life insurance and life insurance tax benefits provided by private insurers.
You are qualified for a Section 80C annual tax deduction of up to Rs. 1.5 lakh if you purchase a life insurance policy from an insurer that has been approved by the Insurance Regulatory and Development Authority of India (IRDAI). Visit the official website of IRDAI for further details.
What exemptions are permitted under section 10(10D)?
The exemptions are based on the date the policy was issued and the requirements listed in section 10(10D) of the Income Tax Act, much like the tax deductions you can take advantage of on a life insurance policy. The exemptions, which apply to insurance payouts, are a key component of the tax advantages of life insurance.
For life insurance plans purchased after March 31, 2012, the exemption premium paid for any given year throughout the policy term cannot exceed 10% of the total assured. For life insurance plans purchased between the first of April 2003 and the last day of March 2012, the premium paid during any given year during the policy term cannot exceed twenty per cent of the sum assured. Additional death benefits will continue tax-free under Section 10(10D) of the Act.
* Currently, there are 2 tax regimes in India – new and old. To get the tax benefit you desire, choose the correct one after consulting an expert. You can opt for a regime change during the next financial year.
Answers to a few common questions about India’s life insurance tax advantages
Here is a compilation of frequently asked questions that people ask before purchasing a life insurance policy to assist you in selecting a life insurance policy that best suits your financial needs:
When purchasing a life insurance policy, should I only take tax benefits into account?
Although life insurance tax benefits exist for buying life insurance, this should not be your primary motivation. Instead, you should think about the plan’s various components, such as the duration of the life insurance policy you select, the required premium, the inclusions and exclusions of the policy, and the effects of premium default.
How much income tax may I save by paying the premium for a life insurance policy?
A life insurance policy’s ability to reduce your taxable income is dependent on a number of elements, including the kind of policy it is and the premium you pay. You are eligible for a tax deduction for the life insurance premium up to Rs. 1,50,000 per year under Section 80C.
What would transpire if I stopped paying my life insurance premiums?
A life insurance policy must remain in force to receive the income tax advantages. To avoid paying income tax during the chosen policy’s tenure, you must pay the premiums in full. Your life insurance policy is subject to discontinuation if you fail to pay the premium, which means you will not be able to benefit from the income tax advantages of life insurance and that your benefits of life insurance may be impacted.
A life insurance calculator is an easy-to-use tool to check the amount of premium you would have to pay.
What will occur if I fail to pay my life insurance policy’s premium on time?
You get a grace period of up to 30 days if you have an annual life insurance premium that is past due (15 days if the premium is paid every month). Any benefits of life insurance, including the income tax advantages of life insurance, will not be jeopardised by paying the payment during this time. But, your life insurance coverage can expire, and you might lose out on the numerous advantages if you don’t pay the payment after the grace period.
What tax advantages come with purchasing a unit-linked insurance plan?
One of the most common types of life insurance policies that provides long-term financial protection and tax advantages are unit-linked insurance plans, also known as ULIPs. Only if you continue making premium payments for ULIPs for at least five more years will you be eligible for the income tax advantages of life insurance.