Saving money is an important component of life for everyone. Every individual seeks strategies to lower tax responsibility, especially when it comes to saving taxes. You can also get tax breaks by purchasing term insurance plans. Along with life insurance, you can profit from term insurance tax benefits. There are, however, some features of term insurance plans benefits in income tax that you should be aware of.
What is Term Insurance?
Term insurance, the most basic form of life insurance policy, provides an individual with life insurance coverage for a set length of time in exchange for the regular payment of a set premium. If the life insured dies during the policy period, the policy nominee would receive a death benefit as stipulated in the policy inclusion conditions.
A term insurance plan is quite reasonable, and you may get even more benefits by adding add-ons/riders to it. You should also be aware that a pure term insurance plan has no monetary value and provides no survival benefit. However, you may obtain several other benefits by investing in a good plan, such as term insurance tax benefits.
Tax Benefits of Term Insurance Plan
When you purchase a term plan, you can take advantage of not one but many term insurance tax breaks. These perks allow you to save money on taxes while also safeguarding your loved one’s financial future.
Let’s take a closer look at the term insurance tax benefits to answer some common issues.
Section 80C of the Income Tax Act of 1961 governs the most basic term insurance tax benefits every Indian taxpayer can obtain. Indeed, many individuals consider this Section to be the most popular tax-saving strategy.
Term insurance tax benefits of up to Rs. 1.5 Lakh are available under this Section for premiums paid for purchasing the policies. The highest limit of tax deductions possible under this Section also includes tax advantages on investments in PPF (Public Provident Fund), tax-saving Fixed Deposits, and a variety of other tax-saving products.
You may optimise term life insurance tax benefits by purchasing a significant life insurance policy for yourself, which will help your family members in the long run.
Significant Facts Related to Term Insurance Tax Benefits U/S 80C
1. The yearly premiums you pay for a term insurance plan cannot be more than 10% of the total assured. If it exceeds this amount, the term insurance tax benefits under Section 80C will be applied proportionally.
2. For term insurance plans issued before March 31, 2012, the term insurance benefits are taxable if the yearly premium is less than 20% of the guaranteed total.
Section 80D primarily enables tax deductions for health insurance premiums. It does, however, give term insurance tax benefits, although in an indirect manner.
If you have chosen health-related riders such as Critical Illness cover, Surgical Care cover, and similar covers, you can take advantage of the term insurance tax benefit under 80D. In other words, if you choose these riders together with health insurance coverage, you may optimise your tax savings with your term insurance premiums.
You may take advantage of the term insurance tax benefit under 80D if you choose Critical Illness Cover with term insurance plans from Max Life Insurance.
Aside from the term insurance tax benefits, the life insured and his or her family members might save money through tax exemptions. Section 10 addresses this (10D).
Simply put, the death benefit or maturity benefit received from a term insurance plan is tax-free. This is also subject to the numerous criteria outlined in the document. In general, there is no maximum limit to these term insurance tax advantages. It implies that the full sum you or your loved ones receive under the term insurance plan is tax-free.
As a term insurance policyholder, you should be aware that the tax advantages provided by Section 10(10D) are also subject to certain circumstances. It specifies that a term plan’s maturity or death benefits are not taxable if the premium paid throughout the policy period does not exceed 20% of the predetermined sum insured.
Best tax saving term insurance policies available in India
Here are the 5 best term insurance plans in India from top term insurance firms for you to pick and buy the finest term plan for your family in 2021, as given below:
1. LIC Tech Term Plan
It is a standard term plan that provides financial assistance to the insured’s family in the event of his or her untimely death. This term plan has various important characteristics, including two death benefit options: Level Sum Assured and Increasing Sum Assured, a policy term of 10-40 years, and a maturity age of 80 years.
2. Canara HSBC Oriental Bank Of Commerce – iSelect Star Term Plan
This term plan includes a full life cover option and allows you to customise your life insurance coverage based on your changing lifestyle. It also has a premium return option, spouse coverage, and built-in protection. Furthermore, it provides a variety of death benefit payout options, including lump amount, monthly income, and lump sum with monthly income.
3. Aditya Birla Sun Life Insurance Life Shield Plan
Aditya Birla’s long-term strategy Sun Life Insurance provides eight distinct coverage choices from which customers can select to fulfill the individual needs of their family members. It assures that the insured’s family members are financially secure in the event of the life assureds’ untimely death within the policy’s term. This plan also includes terminal disease benefits and the ability to expand life coverage by adding riders.
4. Max Life Smart Secure Plus Plan
Max Life Insurance’s Smart Secure Plus Plan allows you to personalise comprehensive protection at a low cost by providing two different death benefit options. It also offers many payout choices to fit the insured’s needs, including a lump-sum payment, monthly income payment, and payment in part as a lump amount and part as monthly income. Furthermore, it provides terminal disease coverage and restores all premiums paid at policy maturity.
5. SBI Life-eShield
The policy provides four plan alternatives, from which you may select the best one based on your needs. It is the greatest term life insurance coverage for your family, and you can apply for it online without any hassle. This insurance provides features like renewability, a minimum sum promised of 20 lakhs, surrendering capability, a free-look time, and so on.
<h2>Wrapping It Up</h2>
Although a term insurance plan provides tax benefits, it is recommended that you contact a financial expert. This will allow you to make an educated selection because the rewards may differ depending on your tax bracket. Aside from the tax, while choosing an appropriate term insurance plan, you may compare different term insurance quotations online and discover what all alternatives in terms of premium, coverage, policy duration, riders, and payment modes would work for you.