Why most of the People buy Insurance for Tax Savings?

By | 19/10/2016

A survey suggests that almost 90% of people buy Insurance products to be exemped from tax and to maximise their tax saving. Approximately just 10% of the people Insure themselves and their priorities to secure them seriously.

And an Interesting factor is that one can notice that most of these people buy insurance for no purpose and be victims of Misleading. Insurance agents know that Insurance products have tax benefits. This makes them very valuable to you and countless others in India. So when do you invest in tax saving products like life insurance? At the last minute? Insurance agents know that anything (including life insurance) bought in a hurry means that you would not pay attention to details (fine print). Just sign on the dotted line and buy the life insurance and your tax problems are taken care of.

Through MoneyMindz.Com know the best ways to save your tax in as many ways as possible and we will assist you while buying the right Insurance policy which would serve for a purpose.

Tax Benefits For Insurance Policies In India

  • Under Section 80 C of the Income Tax Act the premium for a Whole Life Insurance and a Term Life Insurance policy is tax deductible up to an amount of 1 Lakh.
  • Under Section 10(10d) maturity benefits are tax free in the hands of the policyholder only if the premium amount does not exceed 10% of the basic sum assured.
  • Death Benefits of Term Life and Whole Life Insurance are tax free .in the hands of the nominee or receiver under Section 10(10d)
  • Under Section 80 C premium for ULIP’s will be tax deductible provided the premium should not exceed 1 Lakh.
  • Under Section 10(10d) the death benefits on ULIP’s will be tax free in the hands of the nominee and any proceeds received from ULIP’s on its maturity will be tax free in the hands of the receiver.
  • Let us consider if we pay the premium of 10% or less of the assured amount of the ULIP then the maturity benefit is tax free under Section 10(10d).
  • Let us consider that the ULIP Policyholder dies, then the death benefits depend upon the type of plan he had taken. Under some plans the policy gives us the sum assured or fund value whichever is higher. In other plans the policy holder gets both the sum assured and the fund value. In first case the mortality charges are lesser as the fund value goes up because it focuses on the returns of the fund and lesser importance is focused on mortality. But in the second case even though we get both the fund value and sum assured the mortality charges are higher.
  • Let us consider that you have commenced a ULIP Policy on January 2007 but due to certain unavoidable circumstances you discontinue this policy before paying the premium for 5 years. Then you will not get any tax benefits for the previous year in which you terminate your ULIP policy.
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