Everyone wishes to enjoy life today, since yesterday is gone, and tomorrow shall never come. The unpredictability in our lives has led everyone to believe that it is essential to be protected. The accidents and mishaps are strong indicators of how fragile human life can be and why we need to systematically guard our lives. Life insurance is a vital tool for providing your family with safety and financial security.
In the event where your loved ones might end up alone in your absence, they will get burdened with a whole host of liabilities. These liabilities include rent, loans, EMIs, and more. If you want to prevent your family from such situations, you should opt for life insurance.
One of the significant benefits of these plans is the tax benefits that you can avail. You can use an income tax calculator online to know the amount that can be saved.
Tax Benefit under Section 80C
Section 80C is the most common Income Tax Act Section that allows tax benefit when you buy a term life insurance plan.
According to this Section, you can get save a tax amount of up to Rs. 1.5 Lakh for the premiums paid for a life insurance plan. There is one essential fact related to term insurance tax benefits under this Section, which you should know.
The yearly premiums that you pay for term insurance should not exceed ten percent of the chosen sum assured. However, if it does exceed, the term insurance tax benefits under this Section will be applied proportionately.
There are many ways in which you can maximize tax savings:
– Choose a Higher Sum Assured
Before you opt for any term insurance plan, you can use a tax calculator online to get an estimate of possible savings. Most of the insurers provide income tax calculators on their website. You should opt for the sum assured after checking with the tax calculator online. The most crucial role of a life insurance policy is to provide a death benefit to your loved ones in case of an unforeseen situation.
This death benefit is the sum assured, which will be paid after the claim is registered. Not many people know that the sum that your loved ones will receive is fully exempt from tax under Section 10 (10D) of the Income Tax Act. Thus, if you opt for a higher sum assured, your loved ones will get a higher death benefit without tax-deductions. Alongside, you can save more tax every year.
– Add Riders
Insurance providers offer numerous term insurance riders to provide supplementary coverage. However, these covers’ benefits are not limited to strengthening your term plan beyond its core features. You can also avail of additional term insurance tax benefits, depending upon the rider you select with your term plan.
For instance, when added to your term plan, a critical illness cover will make you eligible for tax deductions under Section 80D. However, you should note that these deductions can only be availed for a limited amount as defined in this Section. You can use the income tax calculator to evaluate the total savings with the additional premium paid for the riders. This way, the tax calculator online can help you with tax planning every year.
– Choose Term Insurance with Return of Premium
Besides the primary benefits of a term plan with return of premium, you can also avail of higher tax benefits. If you opt for term insurance with a return of premium, there will be an increase in the total premium payable. It enables you to save more money under Section 80C. Use the income tax calculator to check how much tax benefit you can avail of with these plans.
With a term plan with a return of premium, you can also avail of the tax benefit under Section 10 (10D). The maturity benefit of these plans is eligible for tax-exemption under this Section.
– Invest in Other Financial Instruments
Another way to maximize tax benefits is by investing in other tax-saving instruments. The upper limit of Rs 1.5 lakh of tax deductions does not get fully used by most individuals. That is why you can include financial tools like PPF (Public Provident Fund), tax-saving fixed deposits, and ELSS into your portfolio.
Make sure you use the income tax calculator available online and plan your investments according to your total income.
Use these ways to save more tax to fulfill your responsibilities and dreams. Plan your child’s education and marriage without any qualms. However, it will be wise to use the income tax calculators of trustworthy websites. Be a smart investor and learn to save maximum tax with the right investment planning approach.
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