Tax Benefits

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Tax Benefits

Life insurance policies are useful tax planning tools, because the policy holder is eligible for tax benefits under Section 80C and 10D of the Income Tax Act (1961).

Section 80C: (Life)

You can claim deduction from your taxable income on account of premium paid towards life insurance for self, spouse or children.The children may be major or minor, married or unmarried, depenent or independent. You will be allowed a maximum deduction of up to 1.5 lakh.

Section 10(10D): (Life)

The maturity proceeds of Life Insurance policies are tax-free subject to conditions of Section 10(10D) of the Income Tax Act (1961).

You receive a tax free Maturity Benefit (the payout you receive when your policy ends) subject to conditions of Section 10(10D) of the Income Tax Act (1961)

Also, in case of death, the sum assured (plus bonuses) that's paid to the nominee continues to be tax-free.

But if the sum assured is less than 10 times of the premium - for instance you pay 1 lakh as premium for a sum assured of 5 lakh - you will get a deduction of premium up to 10% of the sum assured. In the example, your deduction will be 50,000 and not 1 lakh.

There are income tax benefits on life insurance premium Under section 80C, premiums that you pay towards a life insurance policy qualify for a deduction (from Income) up to 1.5 lakh, while Section 10(10D) makes income on maturity tax-free if the premium is not more than 10% of the sum assured or the sum assured is at least 10 times the premium.

Section 80D: (Health)

You can get tax benefits on premiums paid in any mode, other than cash towards health insurance policies taken for yourself, your spouse, your dependent children and your parents. The maximum tax benefits under Section 80D are as follows:

  • Tax benefit on premium paid up to 25,000 for yourself, your spouse or your dependent children (Limit is 50,000 if the age of insured is 60 years old or more)
  • There is an additional tax benefit on health insurance premium paid up to 25,000 for covering parents (Limit is 50,000 if the age of insured is 60 years or more).

LIC Jeevan Arogya Plan is entitled to income tax benefits for premiums paid up to 25,000 for normal citizens and
50,000 for senior citizens under Section 80D of the Income Tax Act 1961. The best part is that it is over and above the deductions claimed under Section 80C.

Section 80CCC: (Pension)

Section 80CCC of the Income Tax Act of 1961 provides deductions of up to 1.5 lakhs per annum for contributions made by an individual towards specified pension funds that are offered by a life insurance.

The deduction is within the limit of section 80C.

Section 10(10A):

1/3rd of the payment that you receive under pension plan at the time of retirement is also tax-free.

However, if you surrender the plan, the pension/annuity received will be taxed as per the existing tax laws.