An insurance cover not only protects your family but also offers tax-saving benefits. Your premium payments can be eligible for deduction from your income, reducing your tax liabilities and helping you save more.
All premium payments made towards a life insurance policy (such as an endowment plan, whole life plan, term insurance, and unit-linked insurance) under an insurance provider are eligible for tax exemption under section 80C (up to Rs.1.5 lakh), and section 10(10D) of the Income Tax Act, 1961. Premium payments made towards a health insurance plan are eligible for tax exemption (up to Rs.25,000) under section 80D.
What is section 80C of Income Tax Act, and how does it help?
Under section 80C of the Income Tax Act, a policyholder can claim a maximum deduction of 1.5 lakh per year against the premiums paid if the premium paid does not exceed 10% of the sum assured in the policy, provided the policy has been purchased after April 1, 2012. In the event the policy was purchased before April 1, 2012, the premium paid should not exceed 20% of the sum assured.
A life and a health insurance plan helps lower your taxable income by giving you tax-free deductions. Whatever premium you pay on your health insurance or even a medical add-on on your life insurance, you can reduce it from your taxable income. The section 80D of the IT Act allows you a deduction of up to Rs. 25,000. But if you are over 60 years of age, you can deduct more—up to Rs. 30,000.
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