Planning ahead is not only crucial but also fetches tax benefits. Buying life insurance for example fetches tax deductions on premium paid and the maturity amount received is tax exempt under section 10 (10D). Not only this, the assesee also gets deduction on life or health insurance bought for spouse, children.
When you Insure your Loved Ones
Investing in certain life insurance policies such as life insurance, annuity plans of LIC and other insurers get you tax benefits under section 80c and 800ccc. The assessee will also be eligible for deductions upto Rs 20,000 under 80D, on premium paid for senior citizen parents. If the premium paid by the assessee is more than 10% of the capital sum insured then the benefit of tax deductions will be limited to premium upto 10% of sum insured.
Insurance, Investment and Tax Planning
ULIPs or Unit linked Insurance plans provide triple benefit of insurance, investments and tax safety. These investment plans provide a life insurance cover and the units purchased increase or decrease in value with respect to its underlying asset (in which policy money is invested by ULIP fund managers). Tax deductions are available on premiums paid and the payout at the time of maturity is tax exempt under section 10 (10D).
Saving for the Twilight Years
Investing in pension or annuity policies of the Life Insurance Corporation (LIC) or other insurers is also tax deductible under section 80ccc of the Income Tax Act. But is to be noted that this deduction is within Rs 1.5 lakh limit on deductions allowed under section 80c, which encompasses all sources – life, health and annuity insurance plans, investments in PPF, bonds, NPS etc. Which means even if you pay premiums worth 2 lakhs, the maximum rebate you will avail on is Rs 1.5 lakhs
When Insurance isn’t Tax Deductible
When you buy an insurance against air travel or you insure your cellphone against theft. Car insurance won’t get you any tax benefits either.
Bio-line: The above article has been provided by Quicko.com, engaged in assisting in online ITR preparation and efiling. You can sign up with Quicko.com and efile your tax returns within minutes absolutely free. The author can be contacted at anand@quicko.com
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