Life is uncertain, and a life insurance policy helps one ensure that their family’s future is financially secure in their absence.
Apart from protecting your family, you get life insurance tax exemption of the insurance premium paid. So, if you are looking for tax saving schemes, know that you can reduce your income with the help of deductions under sections 80 C, 80 D, etc., of the Income Tax Act. Let us explore income tax saving options with life insurance.
Whenever the financial year ends, there is one concern on most salaried people’s mind: Have I made wise tax saving investments and come up with a solid tax saving plan? There are multiple ways in which you can ensure that your hard-earned money doesn’t get unnecessarily eaten up by huge tax payments. But one of the safest and wisest ways to do this is to get tax benefits from your life insurance cover. So how exactly does your life insurance policy become a tax saving investment? Let’s find out.
Most of us know that under Section 80C of the Income Tax Act, premiums paid towards a life insurance policy qualify for a tax deduction. The maximum amount of deduction that can be claimed under Section 80C is Rs 1.5 lakhs for the current financial year. As a taxpayer, you need to opt for tax saving investments that will get you tax benefits and yet keep your money safe. So, life insurance becomes a viable option.
As a taxpayer you can heave a sigh of relief as you don’t have to pay tax on Rs. 1.5 lakhs of your salary. Instead, you can simply deduct this amount from your taxable income. It is however important to know that this deduction is allowed only for certain expenses and investments. Life insurance premiums are one such expense. In addition, as an investor, you must also be made aware that the life insurance cover needs to be at least 10 times the annual premium that you pay to be eligible for tax benefits.
Another tax advantage of life insurance policies is that taxpayers can claim a deduction under section 80(D) of the Income Tax Act. When an individual purchases life insurance for himself, his spouse, his children, or his dependent parents, he is eligible to claim tax deductions. The below table explains age-wise deduction under section 80D.
| Age of the Policyholder | Premium amount paid | The upper limit of deduction under section 80D | |
|---|---|---|---|
| For self, spouse, children | For parents and in-laws |
||
| Individuals and parents below 60 years |
₹ 25,000 | ₹ 25,000; | ₹ 50,000 |
| Individuals below 60 & parents above 60 years |
₹ 25,000 | ₹ 50,000 | ₹ 75,000 |
| Individuals and parents above 60 years | ₹ 50,000 | ₹ 50,000 | ₹ 1,00,000 |
Some essential points:
This section makes income on maturity tax-free if the premium is not more than 10% of the sum assured or the sum assured is at least 10 times the premium. However, if the sum assured is less than 10 times the premium, you will get a deduction on the premium up to 10% of the sum assured. Let me illustrate. Suppose you pay Rs. 1 lakh as premium for a sum assured of Rs. 5 lakhs. Your deduction will be ₹50,000 and not ₹1 lakh since ₹50,000 is 10% of ₹5 lakh.
Read more to know more about the tax saving instruments under sections 80C and 80CCD.
The government has laid down rules for tax deduction at source from various incomes, and proceeds received from life insurance policies are also one of them. As per the rules, the insurer must deduct tax before paying the life insurance amount to the insured.
According to the income tax rules, income received from life insurance policies is subject to TDS after the premium payment is deducted.
After the TDS has been deducted, you can claim the deduction while filing the income tax return, which will reduce the tax liability.
In case of death, the nominee gets the sum assured and it remains tax-free. On maturity, if life insurance policy satisfies conditions mentioned in the Section 10(10D), maturity proceeds will be exempted from tax. if the life insurance policy doesn’t satisfy conditions, maturity proceeds will be taxable. On such policies, life insurance companies deduct 1% withholding tax. No withholding tax is applicable if aggregate of payment to policyholder should not be more than INR One Lakhs.
In all financial matters, it is better to go through the details carefully. This holds true for insurance policies as well. In the case of term plans, you may not find it critical to go through every detail since the sum assured is much larger than the premium paid. But when you’re considering life insurance as a means of tax saving investments, being aware of the insurance limit becomes important.
The government of India has opened many doors for taxpayers to save their taxes and gain financial benefits while they secure their dependents with life insurance tax-saving options. Sections 80 (C), 80 (D), and 10 (10D) specifically allow deductions if specific eligibility criteria are met, as mentioned below:
One of the benefits that policyholders look forward to is the tax advantage of life insurance. Here are some ways to save tax from a life insurance policy:
Taxpayers in India can take advantage of the various pathways provided by the government to reduce their taxes while also safeguarding themselves and their loved ones with life insurance. The following benefits are available when you buy a life insurance policy.
To know more about Term Insurance browse the website for various Term Plans offered by PNB MetLife
No, when buying a life insurance policy, you must pay attention to the benefits it offers, the extent of coverage it provides, the premium you must pay, and many other factors.
When you purchase a policy from an insurance provider approved by the IRDAI, you can benefit from 80c tax saving options and save up to ₹ 1.5 lakh as per the provisions of section 80(C) of the Income Tax Act.
Yes, as per the income tax rules, if the premium paid is less than 10% of the sum assured, the maturity amount will be tax-free.
If you fail to pay the premium, the policy will lapse or discontinue, and you will lose many benefits.
Your requirements and health conditions must be the criteria for choosing a sum assured. Depending on the sum assured, your premium will be fixed.
The aforesaid article presents the view or an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ before making any decision.
PNB MetLife India Insurance Company Limited, Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka.
IRDAI Registration Number 117. CI No: U66010KA2001PLC028883.
Please read this Sales brochure carefully before concluding any sale. This product brochure is only indicative of terms, conditions, warranties and exceptions contained in the insurance policy. Detailed terms and conditions are contained in the policy document
For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding any sale. Terms and Conditions Apply."Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details" Goods and service Tax (GST) shall be levied as per the prevailing tax laws which are subject to change from time.
The marks “PNB” and “MetLife” are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
Call us Toll-free at 1-800-425-6969.. Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203
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IRDAI or its officials is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint.
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As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at claimshelpdesk@pnbmetlife.com or indiaservice@pnbmetlife.co.in. You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.
PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance Plans, Term Plan, Protection Plans, Long Term Savings Plans , Retirement Plans & Child Education Plan.
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