Find Out If You Are Using This Tax Benefit Of Life Insurance Plans

0
854

Find Out If You Are Using This Tax Benefit Of Life Insurance Plans

Tax slabs in India are subject to modifications from time to time. Please consult your tax expert for more information before making any decisions based on the information provided below. Life insurance plans are excellent tax planning instruments because the policyholder is entitled to tax slabs in India under the Income Tax Act (1961). There are several ways to save taxes, but one of the most efficient tax planning tools is a life insurance plan.

Find Out If You Are Using This Tax Benefit Of Life Insurance PlansFamily benefit abstract concept vector illustration. Family tax benefit, payment per child, help with raising children, economic support, insurance agent, piggy bank, money abstract metaphor.

Income Tax Slabs In India

To put it simply, income tax is a tax amount paid by an individual, group of persons or entity based on their level of gains and income throughout a fiscal year. This revenue might be legitimate, fictitious, or both. The income tax rate for this year has been determined by the government of India and is based on the union budget income tax for 2021.

In India, income tax slabs in India are levied in the form of slabs, which taxpayers must pay. The slab system essentially implies that tax rates are assigned to each individual based on their income.

In summary, a person with a higher income will be subject to a higher level of taxation. The government also includes some tax breaks for persons who are compelled to pay long-term funds. The amount spent in different tax-saving plans is ultimately deducted from gross income.

This also helps to lower the amount of income tax owed, which benefits taxpayers. According to the union budget for 2021-22, gross tax income has increased by nearly 5% from 2019-20. Borrowings are also predicted to climb by 27% throughout the fiscal year 2019-20.

The income tax slabs in India tend to fluctuate over time, always taking inflation into account. Aside from that, the government assures that lower-income persons receive an income tax rebate. The basic objective behind the income tax slabs in India is to guarantee that the government has progressive and equitable tax arrangements.

How to save income tax with Life Insurance Plans?

You may save tax on your hard-earned money by using our life insurance plans and solutions under the Income Tax Act (1961). Tax breaks are available at various phases of the scheme.

Stage 1: Entry Advantage – Sections 80C (life insurance), 80CCC (pension), and 80D (pension) provide tax breaks on premium payments (health)
Stage 2: Earnings Advantage – Your investment with us has the potential to grow and is now exempt from taxation.
Stage 3: Exclusive Switching Advantage – You can change between equity, debt, and balanced funds at any time, and these changes are not taxed.
Stage 4: Exit Advantage –Subject to the provisions of Section 10(10D) of the Income Tax Act, you get a tax-free Maturity Benefit (the payout you receive when your policy expires) (1961)

What is Section 80C?

Section 80C stipulates a combination of activities, including sections 80CCC and 80CCD. If you desire to use your money in some of these activities during the previous year (PY), you can deduct the amount from your total taxable income for the PY.

For Example: Assume you had a total taxable income of $10,000 in the fiscal year 2015-16. (Assessment Year will be 2016-17, when you will estimate and pay the tax on this income). If you invest ‘100,000 of this income in any or all of the activities described in section 80C, your total taxable income for the P.Y. will be reduced to ‘900,000

Eligible Deductions under Section 80C

1. Public Provident Fund (PPF)

You can invest in PPF, which has an annual investment limit of INR 1,50,000 and a lock-in term of 15 years and claims it under Section 80C. Furthermore, the returns at maturity are tax-free, providing you with a double benefit.

2. Life Insurance

Section 80C allows you to deduct premiums paid for life insurance plans for yourself, your children, or your spouse. You may also invest in tax-saving life insurance, such as ULIPs (Unit-Linked Insurance Plans), which have a 5-year lock-in period.

3. Equity-Linked Savings Scheme (ELSS)

The Equity-Linked Savings Scheme (ELSS) is a diversified equity mutual fund with a three-year lock-in period. It provides tax advantages as well as long-term returns. The lock-in period mitigates the impact of stock market lows and compounds the money invested.

4. Employees’ Provident Fund (EPF)

The EPF account is meant to save a portion of your monthly tax-free payment. Interest gained on the corpus should be monitored since the interest earned beyond a specific threshold is taxed.

5. Fixed Deposit

Fixed deposits in banks are eligible for Section 80C deductions, although they have a 5-year lock-in period during which premature withdrawal is not permitted. The interest on the five-year fixed deposit is taxable and not eligible for tax slabs in India.

6. National Savings Certificate (NSC)

NSC is a five-year tax-saving program that can be claimed under Section 80C of the Income Tax Act. The interest earned is taxable, but because it accumulates in the account and is considered reinvested, it is eligible for a new Section 80C claim.

7. Senior Citizens Savings Scheme (SCSS)

With a five-year duration, SCSS is appropriate for older persons and qualifies for a deduction under Section 80C of the Income Tax Act. You must be at least 60 years old to invest in this plan. If you want to retire on your  terms, you can do so after the age of 55.

Wrapping It Up

Life insurance plans are often used to get deductions under Section 80C of the Income Tax Act of 1961. Life insurance premiums can be deducted up to Rs 150,000. (Rs. 1 lakh up to the fiscal year 2014-15). It is widely held that premiums paid on all life insurance plans qualify for deduction under section 80C of the Income Tax Act of 1961. The whole premium amount qualifies for deduction under section 80C.

Individuals can claim tax deductions and lower their taxable income under Section 80C of the Income Tax Act of 1961. It also allows individuals and Hindu Undivided Families (HUFs) to claim INR 1,50,000 as non-taxable income by making specific investments.

LEAVE A REPLY

Please enter your comment!
Please enter your name here