What are the tax benefits associated with Insurance plans? By Athulya - June 22, 2019 Last Updated at: Mar 10, 2020 1430 What are the tax benefits associated with Insurance plans? If you are thinking of securing your family’s future, insurance policies may be the best option for you. Most of the premiums paid and the total amount assured are tax exempted as per the Income Tax Act and hence taking out such a policy will not only help you make your way out of difficult times but will also help you avail some tax benefits. Here’s a look at how to save taxes by relying on insurance policies and how you can utilize these to maximize your earnings. If you want to secure the future of your family, then you need to get the best insurance policy suiting your requirements. Most premiums that are paid have tax exemptions according to the Income Tax Act. An insurance is a contract between the company and you. You will get to know more details regarding how it works from here. An Insurance works as a contract between you and a company, wherein they agree to pay for any financial loss that you may incur as a result of some specific event. In exchange for this protection, the policyholder decides to pay a prescribed amount of money, called premium. Life insurance not only provides your loved ones with security in times of need but also allows you to cut down on the amount of taxes you pay. Here’s how it works. Premiums paid to avail life insurance are tax-deductible as per section 80c of the Income Tax Act, 1961. The exemption may run up to Rs.1.5 lakh per year. To avail the benefits, you may claim deductions for policies taken out in your name, in the name of your spouse, children or even dependent parents. For schemes issued before 31st March 2012, the deduction can be carried out only for an amount which runs up to 20% of the total sum assured. For schemes issued after this date, the deduction works only up to 10% of the sum assured. For schemes issued after 1st April 2013, if the person suffers from a disability or illness mentioned in section 80U or 80DDB, the deduction may amount to 15% of the assured amount. An individual belonging to a Hindu Undivided Family may also file for the above-mentioned tax benefits. Insurance payouts that arises as a result of an untimely death and which is paid to the nominee as survival benefit is exempted from being taxed as per Section 10 (10D) of the IT Act. File ITR before due date Tax Exemptions Payouts for individual policies will not have taxes levied on them in the following cases: If the Insurance is issued after 1st April 2003 and before 31st March 2012, then the payout may not be exempted unless they arise as a result of a death. If the total amount of premiums paid arise to more than 20% of the total sum paid or assured. If the Insurance was issued after 1st April 2012, then the exemption may be availed only if the total premium falls below 10% of the sum assured. If the policy is of Keyman Policy type, then the payout is exempted from a tax deduction. A Keyman Policy is one offered for companies and helps in providing coverage to key people within the organisation. In such cases, the payout received as a death benefit goes to the company. Under section 80 DD (3) and 80 DDA (3) if the individual in question who suffers from a handicap or disability dies before the entire premium is paid out, amounts received will be taxed as regular income is under normal circumstances. Under Section 80D, tax benefits may be levied on health insurance premiums. The amount received as per Section 80DD (3) or 80DDA (3) is not usually tax exempt, but most payouts for the disabled are exempted. The maximum deduction which may be availed is Rs.25,000/- While paying premiums for a health insurance policy for your parents an additional Rs.25,000/- may be claimed as a deduction. While paying premiums for a senior citizen parent money up to Rs.30, 000 may be availed as a tax benefit. Types of Life Insurance Which Provide Tax Benefits Term Plan Unit-linked insurance plan (ULIP) Endowment Plan Money Back Plans Whole Life Insurance Child’s Plan Retirement Plan How to Buy Life Insurance Contact an insurance agent to procure a policy of your liking. Contact them directly via their website or agency contact number to get a rough idea of all the different types of policies they offer and choose the best one out of those. You also have the option of selecting a plan and paying the premium online, making the process a whole lot easier and faster. Make a list of reliable and reputable insurance companies Do a little bit of research regarding the plans and policies they offer Compare all the plans individually, and then opt for the one that suits your needs the best Why Go For Life Insurance Fast and easy to procure Transparent dealings that don’t offer much scope for corruption No hidden costs. Low Cost and less paperwork Opportunity to compare different plans and so lets you plan and choose the right one for yourself Payment portals are secure and convenient. How many GST returns are filed each year? GST returns are not filed annually once but it is filed thrice in a month. Thus based on the latest GST laws the GST returns are filed monthly and annually. Understand the procedure for GST registration and GST returns here. 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