In India, individuals usually tend to ignore the insurance part when financial planning. Some of the individuals do not think it is necessary to have an insurance policy. While, others are happy with whatever the company is offering in the name of insurance.
Insurance plays an important role when planning your finances for future needs. Smart individuals buy insurance plans which will reduce the worry and save money as they are eligible for tax benefits.
There are different insurance plans which fall under 80C, 80CC and 80D under Income tax act.
Here is a glance of insurance plans which you can consider buying and save tax.
Life insurance will take care of all the expenditure of the family in the absence of the policy holder. It is a must of the earner of the family. So that there will be no shortage of income even in the absence of the earning person.
Life insurance products comes in different forms such as ULIPs, endowment plans, money back plans, term plans.
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- The premiums paid on these policies are eligible for tax deductions under 80C.
- Individuals can avail maximum deductions up to Rs 1.5 lakhs.
- The maturity or bonus amount will be tax-free in the hands of the holder on maturity or death under Section 10 D.
Pension plans have two phases: one is accumulation phase and other is withdrawal phase. Accumulation phase is the phase where the initial accumulation of premium payments in earning years. Note that tax benefit is applicable on the premium payments of the accumulation phase.
- Tax benefit under Section 80CCC which is sub-section under Section 80C
- The maximum limit under 80CCC is raised to Rs 1.50 Lakh
- Only one third of the accumulated amount is eligible to be tax-free and the balance of two third will be treated as income.
- The amount will be tax-free upon the death of the beneficiary.
In the event of accident or hospitalization, mediclaim of any health insurance will take care of the expenses incurred.
For individuals, maximum deduction eligible is Rs 15,000 on premium paid. This budget 2015, mediclaim insurance benefits are increased for the senior citizen, and the amount is increased to Rs. 20,000.
The tax benefit is eligible under 80D of Income tax act.