Wealth Guide: Income Tax - These insurance policies can help in saving taxes

Most people are unaware of the fact that insurance policies can also help in saving taxes. Moreover, with the rising healthcare cost, everyone requires sufficient insurance cover or medical coverage. One can avail the benefits of insurance coverage and tax benefits on life insurance and health insurance policies. Ankit Agarwal, Co-founder & CEO InsuranceDekho, shares his knowledge on how to save Income Tax by means of some insurance policies.

“Did you know that you can save taxes under Section 80C and 80D of the Income Tax Act 1961, by investing in a life insurance or health insurance policy? When you purchase a life insurance policy you will have to pay premiums to be able to receive and avail the coverage benefits available under the insurance policy,” Ankit Agarwal said.

Explaining Sec 80C, Agarwal said, “Under Section 80C of the Income Tax Act, premiums paid towards any life insurance policy qualify for tax exemptions. Under Section 80C, (along with deductions under Section 80CCC and 80CCD of the Income Tax Act) tax exemptions for up to Rs. 1.5 Lakh is available for the premiums paid towards a life insurance policy.”

Advising on Sec 80D, he added, “Under Section 80D of the Income Tax Act, premiums paid towards any health insurance or medical insurance policy qualify for tax exemptions. Now that you have understood the basics of tax savings by investing in the life insurance or health insurance. Let’s try and understand it better. This will help you make an informed decision.”

Tax Exemptions (Section 80C) Under Life Insurance

“Life insurance policies provide life cover to the life assured and ensure the financial security of their loved ones in case of unforeseen demise of the life assured during the policy tenure. Apart from this, there are several other types of life insurance policies that offer different benefits such as wealth appreciation, life cover, help on building a retirement corpus, help in investing in market-linked funds, child’s savings options,” he explained.

“Section 80C of the Income Tax Act has some conditions regarding tax exemptions on life insurance policies. Under a life insurance policy, either the policyholder or Hindu Undivided Family are eligible to claim tax exemptions on premiums paid. NRI or people of foreign nationality who have invested in a life insurance policy within India are also getting tax exemptions under this Section,” he added.

“You, yourself can be the policyholder or purchase a life insurance policy for your husband/wife, dependents such as parents, or children. You can choose to purchase a traditional life insurance policy, term insurance policy, or a unit-linked insurance policy, all types of life insurance policies provide tax benefits. Maximum tax exemptions under a life insurance policy are Rs. 1.5 Lakh which includes all the avenues of insurance and premium paid towards the life insurance policy. Keep in mind that tax benefits are subject to changes in tax laws,” he further added.

Tax Exemptions (Section 80D) Under Health Insurance/Mediclaim Policy

He explained, “A health insurance policy provides coverage for medical expenses that may arise due to illness/accident, medical expenses include hospitalization, medicines, consultation fee, etc. Section 80D of the Income Tax Act allows the policyholder, Hindu Undivided Family, NRI to avail tax exemptions for the premiums paid towards health insurance or mediclaim policies.”

“Under this Section, there are a few payments which can be exempted such as premium of health insurance, expenses of health check-ups, etc. Mediclaim policies and critical illness policies also qualify for tax exemptions under Section 80D of the Income Tax Act. Tax exemptions are only applicable if the premium paid is in another mode other than cash. The value received on maturity of a critical illness policy is also tax-free. maximum tax exemptions under a health insurance or mediclaim policy are Rs. 25,000,” he added.

Conclusion

“Apart from getting coverage, you can also use life insurance and health insurance policy to avail tax benefits. There are some particular exemptions when it comes to tax exemptions under life insurance that you may want to make a note of. Under Section 10(10D) of the Income Tax Act, all proceeds received from a life insurance policy also qualify for tax exemptions,” he concluded.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)