Term Insurance 2111 views February 15, 2019

Know How Term Insurance Plans Protect And Save With Tax Benefits

With only a few months left for people to file their Income Tax Returns (ITR), most of them are scrambling to make investments that can also help them save on tax payments. While there are investments that promise high returns in addition to availing customers the benefit of necessary tax deductions and rebates, there are very few that guarantee protection against unforeseen risks. Having term insurance ensures a risk cover against loss of income resulting from the death of a loved one. Though there are insurance plans that offer some kind of security in addition to returns, term insurance plansare synonymous with guaranteed indemnity against any untoward event including death, disability, and disease at lowest premiums coupled with tax benefits.

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Tax Deductions & Rebates on Term Insurance Plans

What if someone told you that your family would stay protected while you pay your taxes? The answer lies in buying a term policy, an inexpensive financial tool that protects and preserves while also saving on tax payments. As per the guidelines by the Income Tax Act 1961, term insurance policyholders are eligible for tax benefits under Section 80C and Section 10(10)D of the Act. Section 80C of the Income Tax Act allows provisions for tax deductions on the premiums paid towards the policy. In addition, death benefits are exempt from tax under Section 10(10)D, which means that the proceeds or the sum assured received by the policyholder’s nominee do not come under the purview of tax evaluation.

The tax exemptions and deductions are not limited to level term insurance plans alone. Current tax laws also offer tax benefits on term insurance return of payment policies, also called TROP plans, or those promising survival benefits. This means that the premium paid and the amount earned as survival benefits if the policyholder survives the policy period, are free from any tax liability under Section 80C and Section 10(10) D of the Income Tax Act respectively.

While filling in details required during income tax declaration, most people tend to ignore how life insurance policies, including term insurance, advance tax benefits to policyholders. Details of available tax deductions highlight how buying a term plan helps avail tax benefits in addition to ensuring adequate cover.

Choose life cover over others

It is not uncommon among today’s generation to prefer investments that highlight increasing fund performance over the past five years. Most of these investments being market-linked in nature are vulnerable to the ebbs and flows of the stock market. The expectation to earn high returns must be balanced with the understanding that a crash in the stock market can push your investments down the drain. Term insurance plans in India are devoid any savings and investment components and, hence, ensure a definite amount of sum assured as death benefits. With risk being an all-pervasive factor in our lives, ensuring a risk cover to keep our family protected in addition to the multitude of investments we make is imperative.

While the necessary tax breaks seem a welcome move from the mounting expenses owing to inflation, seek tax breaks must not be the ultimate motive to invest in a life insurance plan. Term insurance essentially means keeping your loved ones insured against unfavorable circumstances or adapt to meet future monetary obligations. While the future does not lie in our hands, what we can do is to plan well ahead in advance in a manner that helps meet any possible obligations in the future.

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