Most of the people in India invest in insurance with an aim to save taxes. Now the question is whether this notion is for real? Do life insurance buyers really get tax rebates in respect of premium paid on life insurance policies? Let’s find out……
Yes, it is true that life insurance plans can be used as helpful tax planning tools.
How?
Under the Income Tax Act 1961 (Act), a life insurance policy holder is entitled for tax benefits. Finance experts recommend investment in life insurance plan as the most effective tax planning instrument. The life insurance plans will help individuals save tax and look forward to achieve their long term goals.
Tax Rebates on Life Insurance Policies in India
The life insurance premium paid by an individual straightaway becomes eligible for rebate under Section 88 of Income Tax Act. Here, the policy holder can claim rebate on premium waged for a maximum of 70,000 INR in each FY (financial year).
The Calculation for Tax Benefits
The calculation of tax rebate under Section 88 is based on the gross total income as well as contribution made towards premium of life insurance policy.
For instance, if the gross total income of an individual is:
- Less than 150,000 INR, the rebate is calculated at 20 per cent of the premium paid towards life insurance policy.
- Greater than 150,000 INR and less than 500,000 INR, the rebate is calculated at about 15 per cent of the total premium paid towards the policy.
- Greater than 500,000 INR, the policy holder is not eligible to claim any tax benefits on the premium waged.
Tax Rebates on Maturity Proceeds and Pension Policies
It is important to note that the maturity proceeds of life insurance plans are not taxable. On the other hand for pension plans, an amount received on surrender of the plan shall be considered to be the income of assessee and taxed in view of that.
Income Tax Benefits on Life Insurance | Buy Insurance Today
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