Understanding insurance as a tax-saving option
Understanding insurance as a tax-saving option 21st July 2022
Every legitimate and eligible citizen of India is supposed to pay Income Tax regularly within the specified time limit as per the government regulations and norms. The taxable amount is based on an individual’s annual earnings. There are different tax and income slabs defined respectively by the Indian government. One must consider their earnings and calculate their taxes accordingly. These taxes are righteously used for the benefit and progress of the country.
But amidst all these details, were you aware that insurance, apart from protecting you and your assets against various risks, also is a substantial tax-saving benefit? This important question may give you a broader perspective on the insurance and tax-paying correlation. We have all the information you will need to understand the perks of insurance and how it can be a tax-saving choice. Let’s dive deeper into the facts!Which policies help you fetch tax benefits?
Insurance options that will help you avail of full benefits along with tax-saving options include:
● Retirement plans and policies
● Health insurance policies
● ULIPs-Unit Linked Insurance Policies
All these insurance policies can be categorised under similar yet slightly different sections of the Income Tax Act regulated by the Government of India.
Understanding the tax deductions.
Various types of deductions can influence the tax benefits you can get on your health insurance. Let’s understand what 80C and 80D tax deductions are. Tax deduction can be claimed on your taxable income on premiums valuing around Rs. 1.5 lacs.
These premiums are supposed to be paid for insurance policies in your name, spouse’s name, or your children’s/child’s name/names. If you are someone who has paid their premiums, you can avail of 80C and 80D tax deductions annually.
The 80D deduction.
The 80D deduction dictates that if you have a health insurance policy in your name or the names of your spouse and children, the tax-deductible income can be Rs 25,000 on the insurance premiums.
According to section 80D, there are various other prospects for this deduction, but we will now consider this information to discuss the tax benefits further.
The 80C deduction.
According to section 80C of the Income Tax Act, the tax-deductible you can claim is worth Rs 1.5 lacs of insurance premiums. If you purchase a single premium policy, you can only claim the tax benefits under section 80C of the Income Tax Act.
Under section 80D, if you have a health insurance policy under your name along with a dependent with the minimum age of 60, you can claim a tax deductible on the dependent’s health insurance.
Protecting your financial assets against unprecedented situations and getting compensation for your financial losses is essential. Times can be very unpredictable, and you might never know when you will need a lot of money. Exhausting your savings is not a wise option here. You need to think beyond and try to avoid burning a hole in your pocket.
While being mindful of your expenses and determining a budget is one of the top solutions here, insurance is another way you can stay secure about your assets. It is vital to purchase the right general insurance after exploring the market and determining the one that can cater to your needs in the best way possible.
Click HERE to know more about general insurance.
Disclaimer: The information provided above is for illustrative purposes only. To get more details, please refer to policy wordings and prospectus before purchasing a policy.