Tax Saving Tips: How to Save Income Tax via Term Insurance Plan in 2024

In 2024, as individuals explore various options for effective tax saving, term insurance plans emerge as a favorable choice not only for life coverage but also as a means to reduce taxable income. These insurance products offer considerable tax benefits under different sections of the Income Tax Act, making them a smart inclusion in one’s financial portfolio.

This article provides comprehensive information on how to save income tax by leveraging term insurance plans.

Tax Benefits on Term Insurance

The solution of how to save income tax in India through term insurance plans in 2024 can be executed by understanding several key points and strategies:

1. Section 80C Deductions

• Deduction Limit: Under Section 80C, the premiums paid for term insurance are eligible for tax deductions up to a maximum limit of ₹1.5 lakhs annually. This limit is inclusive of other investments and expenditures eligible under the same section.
• Eligible Policies: This deduction applies to premiums paid for term insurance policies taken out for yourself, your spouse, and your dependent children, allowing for wider coverage of the family under the tax-saving umbrella.
• Premium to Sum Assured Ratio: For policies issued post-April 1, 2012, the premium must be within 10% of the sum assured to qualify for deductions. For policies issued before this date, the premium should be less than 20% of the sum assured. It ensures that the tax benefits are aligned with the actual insurance cover provided.

2. Section 10(10D)

Exemption on Policy Maturity or Death:

• Premium Limit for Exemption: Amounts received on the maturity of the term insurance policy or the death of the insured are exempt from tax under Section 10(10D), provided the premium is within the aforementioned limits of 10% or 20% of the sum assured.
• Full Exemption Benefit: This ensures that the entire sum received by the nominee, or the policyholder is not subject to any tax, providing complete financial benefit without any tax liability.

3. Section 80D

• Tax Deductions for Riders: Income tax saving plans can include riders for specific health-related issues, such as critical illness coverage. Premiums paid for these riders qualify for additional tax deductions under Section 80D, which is over and above the deductions available under Section 80C.
• Deduction Limits Based on Age: The amount of deduction under Section 80D is contingent on the age of the insured. For normal individuals, a deduction of up to ₹25,000 is allowed, while for senior citizens, this limit is extended to ₹50,000. This higher limit for seniors acknowledges the increased health risks and associated insurance costs for older individuals.

How to Choose the Right Tax-Saving Insurance Plan

1. Assess Your Coverage Needs: Consider factors like income, liabilities, and the family’s financial needs to determine the appropriate cover amount.
2. Compare Plans: Look at different plans from various insurers to find the one that offers the best coverage at an affordable rate.
3. Check Claim Settlement Ratio: Choose an insurer with a higher claim settlement ratio to ensure reliability.
4. Consider Riders: Evaluate if you need additional riders for more comprehensive coverage.
5. Review Policy Terms: Understand the policy terms, including the premium payment period, policy tenure, and any exclusions.

Conclusion

Considering how to save tax in 2024 under the old regime with term insurance is a wise choice. PNB MetLife provides all such insurance plans that will help save taxes. With this, regularly reviewing and updating your insurance plan is crucial to align with life changes, financial goals, and tax norms.

Remember, continuous engagement with your financial advisor and staying informed about market trends will ensure that your term insurance investment remains a prudent and beneficial decision in the long run..