If the policy is purchased after 1st April 2012 and premium is more than 10% of the sum assured, then:
Only that premium will be eligible for tax deduction under Section 80 C which is equal or less than 10% of the sum assured.
On maturity, the insurance maturity amount will be taxed as the premium was more than 10% of the sum assured. This is a bigger hit for insurance buyers and comes several years later when its already too late to do anything.
So in your best interest, if you are planning to buy life insurance, do not ignore the tax angle. Make sure that the premium paid is not more than 10% of the total sum assured. Because if you don’t and the premium is more than 10% of sum assured, then only a part of the insurance premium will be tax deductible. If that wasn’t bad enough, the maturity proceeds of the insurance policy will also be taxable at the time of maturity.
If in doubt and if you feel your insurance agent is fooling you, throw your knowledge of the 10% rule of Section 80 C and 10(10 D) on him. He will be forced to revise his claims if he is lying.
There are various life insurance products like endowment plans, money back plans, whole life plans. But the most effective life insurance is Term Insurance. All others mix insurance with investments which results in under insurance and poor returns on maturity.
I have long advocated that Term Life Plan is the best life insurance option for most people. But also remember that unlike Unit Link Insurance Plan and traditional insurance plans, there is no maturity amount in term plans. Only death benefits.
But nevertheless, whenever you are purchasing insurance, it is important to understand how much of your premiums will get tax deducted and what is the tax ability of life insurance maturity payout. Since most people buy insurance as a tax saving & investment product, these important things get overlooked. That said, it’s wrong and you should never purchase a financial product just to save taxes.
So hopefully, you now have a better idea about the tax ability and income tax benefits of the Life insurance plans in India.
Only that premium will be eligible for tax deduction under Section 80 C which is equal or less than 10% of the sum assured.
On maturity, the insurance maturity amount will be taxed as the premium was more than 10% of the sum assured. This is a bigger hit for insurance buyers and comes several years later when its already too late to do anything.
So in your best interest, if you are planning to buy life insurance, do not ignore the tax angle. Make sure that the premium paid is not more than 10% of the total sum assured. Because if you don’t and the premium is more than 10% of sum assured, then only a part of the insurance premium will be tax deductible. If that wasn’t bad enough, the maturity proceeds of the insurance policy will also be taxable at the time of maturity.
If in doubt and if you feel your insurance agent is fooling you, throw your knowledge of the 10% rule of Section 80 C and 10(10 D) on him. He will be forced to revise his claims if he is lying.
There are various life insurance products like endowment plans, money back plans, whole life plans. But the most effective life insurance is Term Insurance. All others mix insurance with investments which results in under insurance and poor returns on maturity.
I have long advocated that Term Life Plan is the best life insurance option for most people. But also remember that unlike Unit Link Insurance Plan and traditional insurance plans, there is no maturity amount in term plans. Only death benefits.
But nevertheless, whenever you are purchasing insurance, it is important to understand how much of your premiums will get tax deducted and what is the tax ability of life insurance maturity payout. Since most people buy insurance as a tax saving & investment product, these important things get overlooked. That said, it’s wrong and you should never purchase a financial product just to save taxes.
So hopefully, you now have a better idea about the tax ability and income tax benefits of the Life insurance plans in India.
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