Life insurance policies are considered as useful tax planning tools. Under this, the policyholders are eligible to avail of the tax benefits according to the Income Tax Act 1961. So, life insurance plans not only offer medical protection, but they are also a great tool for doing tax planning or long-term savings.
In this, the benefit is available to Individual assessee and Hindu Undivided Family assessee
b. In case of HUF assessee - any member of HUF
The above benefits shall be reversed if the policy is terminated/ceases to be in force within 2 years for traditional products and 5 years for ULIP products after the date of commencement of the policy.
Under Sec 80CCE –
The maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC will be limited to Rs. 150,000.
Under Section 80D
The benefit is available to Individual assessee and Hindu Undivided Family assessee:
The amount for which one qualifies under Section 80D for self, spouse and dependent children is Rs. 15,000/- and additional deduction is applicable up to Rs. 15,000/- for the parents and Rs. 20,000/- is applicable for senior citizen parents. Assessee can make any payment on account of preventive health checkups for maximum Rs. 5,000 within the prescribed limit.
Premiums that are paid for the disabled dependents can make deductions up to Rs. 50,000 annually. A higher deduction of Rs. 75,000 shall be allowed, where a dependent is a person with a severe disability.
Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, will be exempt from tax. However, this rule does not apply to the following amounts:
Any sum received apart from the death benefit under an insurance policy which has been issued on or after April 01 and if the premium payable in any of the years during the term of the policy does not exceed 20% of the sum assured. For insurance policies issued on or after April 01, 2020, exemption would be applicable for policies where the premium payable for any of the years during the term of the policy does not exceed 10% of the actual capital sum assured. (for policies issued on or after 01 April 2013,15% of actual capital sum assured in case of a person with severe disability or specified ailment).
Note: You can only claim for this if you have chosen the old tax regime. Under the new tax regime, there are no exemptions.
Life Insurance is indeed an important tool to cover the risk of uncertainties in life and one should always ensure to stay adequately covered.