Insurance is the highest form of assurance and current pandemic scenario proved it. Insurance is a binding agreement between the insurer and the insured, depending on the purchased policy you will get the access to the best form of care. The underlying requirement is to make sure you and your loved ones are always protected whatever will be the situation.
Income Tax Deductions- Section 80D and 80C
There are various financial benefits of purchasing an insurance policy. Apart from the sizable coverage that insurers offer, the income tax benefits are also abundant. Everybody like to have an option to save more money?
There are few sections of the Income Tax Act under which you can save money on insurance which are section 80D and section 80C.
Section 80C includes an entire list of investments that when done by you, you can claim tax deduction while filing for your income taxes. Some of these are EPF (Employee Provident Fund), PPF (Public Provident Fund), Life Insurance, Infrastructure bonds, and many more. These schemes and investment options have been listed and you can choose any one which has the maximum benefit for you.
Section 80D refers to tax benefits available to you on the health insurance premium that you may have paid over the financial year. Nowadays health insurance is one of the most crucial types of insurance. It ensures that in case of unforeseen injuries and/or hospitalization you are covered. One of the best advantage of a health insurance is cashless hospitalization, which ensures that you will get no delay in hospitalized and get the best treatment.
Insurance policies for you and your family
Choosing the right insurance policy is extremely crucial and should be done after considering your need and all the other factors. If you have dependents, then the policy should provide according to their requirements as well. In such cases, you should go for a family insurance policy rather than an individual policy for everyone as it is cheaper and endows more benefits.
Life insurance policy
A life insurance policy is a contract that states that the insured person’s family will receive a certain amount after the insured has passed away. The family get the amount when the insured passes away. This ensures that the family will not face shortage of money and can take their time to streamline their life.
Health insurance policy
Health insurance is of different types and can be modified to fit the needs of people with identified pre-existing illnesses. The premiums paid can be used to claim income tax deductions.
There are insurance packages based on the age of the insured and benefits are available accordingly. There are OPD facility, maternity cover etc. for the young generation. The older generation gets advantages which are suitable to senior citizens, which include coverage for alternate treatments such as AYUSH, no capping for room rent, and many more. Paying for health insurance for yourself and your family, with dependent senior citizen parents, makes you eligible for income tax deductions up to a maximum of INR 1 lac.
Term Insurance Policy
Term insurance is an agreement to give compensation to the family after the demise of the insured. The difference between life insurance and term insurance is that in term insurance, you are eligible to get the amount only in case of the death of the insured. The premiums amount paid for term insurance are lower but the insurer has no financial liability after the tenure is over irrespective of the date of death.
How can the limits of tax deductions be maximized using each insurance?
| Insurance Type | Income Tax Act’s Section | Maximum saving on tax | To get be eligible for tax exemptions these Conditions to be met |
| Life Insurance | Section- 80C | INR 1.50 Lacs | 1. Premium amount should not be more than 10% of the sum assured. 2. If the premium is bigger, the amount proportionately eligible will be considered. 3. In case of death, the sum assured is tax-free, but if the policy get mature then it is taxable. |
| Health Insurance | Section- 80D | INR 1.00 Lacs | 1. Maximum deduction can be INR 1 lac in case you and your parents both are senior citizens. 2. Premium should be paid via any mode other than cash. 3. Amount available for senior citizens’ deduction can spent on medical expenses too. |
| Term Insurance | Section- 80D/80C | INR 1.50 Lacs | 1. If the policy is surrendered or terminated, before two years from the beginning of the policy, the policyholder won’t receive the tax benefits. 2. For those policies which are issued before 31st March 2012, deductions will be applicable if the premium does not exceed 20% of the sum assured in the FY. 3. Term Insurance is covered u/s 80C, however, if the policyholder has chosen a health-related rider, with their term insurance, they can avail deductions under section 80D too. |