An
insurance policy is useful in covering the risk. It should be considered as the
best tax saving instrument as well. The insurance policy will play a crucial
role in your tax-saving strategy. You should reduce the tax as well as increase
the corpus in an effortless manner. In some cases, you will want to buy more
than one insurance policy to protect your interests. There will be better risk
coverage and increase the tax exemption as well.
Life insurance plans
Life
insurance plans focus on covering the risk to life. The future of the family
will be protected. If the breadwinner dies due to natural or sudden death,
there will be huge emotional and financial void. It is not possible to fill the
emotional loss by any means. However, the financial loss can be filled with the
protective insurance plan.
The
spouse or children will get the ‘sum assured’ plus the bonus as per the type of insurance
plan. The returns are completely tax-free in the hands of the beneficiary.
Hence, you will get tax exemption on the premium contribution and the returns
as well.
The
premium up to Rs. 1.5 lakhs contributed in a financial year towards the life
insurance plan is eligible to save tax under Section 80C. The maturity proceeds
on the death benefit are eligible for tax exemption under Section 10 (10D).
If
the policy is surrendered to the insurance company, it will be treated as a
reduced paid-up policy. The proceeds will be clubbed with your earnings and it
will be taxed as per your income tax bracket.
Retirement plans
The
premium contribution towards the pension plan is eligible for deduction under
Section 80CCC of the income tax act. The Section 80CCC is the sub-section of
the Section 80C. You can get income tax exemption up to 1.5 lakh premium
contributed towards the pension plan. However, the total exemption under the
Section 80C will be Rs. 1.5 lakh. Even though you have an additional investment
in tax-saving fixed deposit, PPF, National Savings Certificate, EFPO, home loan
principal and other tax-saving financial instruments, the total tax exemption
under Section 80C should not exceed Rs. 1.5 lakh.
The
pension plan will ensure that there will be a steady stream of income after
retirement. These plans are also called as annuity plans. The annuity can be
purchased from any insurance company.
You
can opt for an immediate annuity or deferred annuity as per your financial
needs. If you need pension right after the payment of premium, you should want
to go for immediate annuity policy.
If
you have the potential to generate income, you can choose deferred annuity
option. With a pension plan, you will manage a steady source of income to meet
your everyday expenses. You can take care of the needs of your spouse and the
nominee will get the benefit as per the type of the plan.
You
should pay marginal tax on the two-thirds of the maturity proceeds of a pension
plan. The remaining amount is tax-free.
Health insurance plans
As
the healthcare costs are rising at a constant pace, you should have access to a
health insurance plan as well. If you buy a healthcare insurance plan you can save
tax also. The health insurance premium can be deducted under Section 80D of
the Income Tax Act. You should not go for health insurance plan for the
insurance sake but to ward off the financial difficulty due to hospitalization.
If
you enroll in a health insurance plan at a young age, the premium will be low.
You can enjoy ‘no claim bonus’ in
subsequent renewals. The pre-existing conditions will be covered after the
waiting period. As your age increases, the premium will increase (as the risk
to various kinds of diseases will increase). The health insurance premium paid
towards self, spouse and children will be deducted from the income tax under
Section 80D.
There
will be a tax benefit to the extent of Rs. 25,000 for the self, spouse, and
children. Additional tax benefit to the extent of Rs. 25,000 will be offered
towards premium contribution to parents. Hence, you can claim a total of Rs.
50,000 as a tax deduction under Section 80D. For senior citizens, the total
exemption is offered up to Rs. 60,000 in a financial year.
There
are various kinds of health insurance policies. The critical illnesses are not
covered under the basic premium. You should go for the additional rider to
cover the critical illness as well.
Conclusion
To save tax and cover
various kinds of risk factors in life, you should go for more than one
insurance plan. Ideally, you should have at least one life insurance plan, one health
insurance plan and one pension plan as per your budget and lifestyle. In some
cases, you should purchase more than one policy in the same category to enjoy
better risk coverage and a tax benefit.
Comments
Post a Comment