How to get tax benefit through insurance?

In March, every business comes into pressure and highly focuses on financial planning. They look forward the ways to get tax benefits by buying insurance. Insurance can avail tax deduction and release of proceeds from tax. You can get tax benefit buy buying both life insurance as well as health insurance.

There are three sections of Income Tax Act 1961 which is very necessary to be discussed while we are discussing about tax benefit. These three sections are, Section 80C, Section 80D and Section 10/ Section 10D.

Section 80C: This section avail the tax benefits up to Rs. 1 lac. The yearly premium amount value is deducted from your taxable income. There are two conditions that comes under Section 80C,

• The benefits for premium you are paying are limited to 20% of sum assured.

• The insurance policy has to be in active position for minimum 2 years or your tax benefit which is already taken will be reversed.

Example: Ram Lal has taken life insurance plan with sum assured of Rs. 3 lacs. He can get utmost premium benefit of 20% of Rs. 3 lacs i.e Rs. 60,000. If his premium is Rs. 65,000, then also Rs. 60,000 will be measured.

So, it is very important to take sum assured as 5 times the annual premium. Now if Ram Lal surrenders his insurance policy after one year, then the tax benefit taken by Ram Lal will be inverted in that particular year.

Section 80D: Under this section, a person can gain tax benefit if the person have bought health insurance or generally called medi-claim policies. Maximum deduction is Rs. 15,000 but for senior citizen deduction is Rs 20,000. Though, combined tax benefits can be availed by individual of Rs 35,000 if he buys health insurance for himself and his parents (senior citizens).

Section 10(10D): This section is also called Section 10D. Under this section, the sum assured provided to nominee or beneficiary as death claim after the death of policy holder is totally free of tax. 1/3 portion of pension value at vesting age is deducted from tax.

It is very important to review your financial profile while planning to get tax benefits. You should always maintain visible balance between liquid cash and long term assets.

I have discussed about the section which come in Income Tax Act 1961 and the benefits we can avail. If you have any question related to getting tax benefits through insurance or want to share any information related to getting tax benefits you can share it on the below comment box.