Should You Buy Life Insurance to Save Tax?

One of the important things that we need to have in our financial portfolio is life insurance. Many ignore its importance and decide not to buy it. However, not buying insurance may cost you more in the future than buying one now. Any unforeseen situations such as death can put your family into a lot of troubles. Without your financial assistance, their lives can become difficult. But you can secure their future by purchasing life insurance. If the policyholder dies during the term, then the insurer must pay an amount as death benefit. However, life insurance gives more benefits than the death benefit.

Some of its benefits are-

Death Benefit

With life insurance, you can secure your family’s future. When a person purchases life insurance, the insurer must give an assured sum to their family if the policyholder passes away during the term.

Low-Risk Investment

Life insurance is a low-risk investment as compared to other investment instruments. With life insurance, you will get returns on your investment. Unlike other investment schemes, which are driven by the market, you won’t lose money. If you die, then the assured sum will be given to your family or you after the end of the term.

Life Planning

Life insurance is a long-term investment plan. With it, you will secure you and your family’s future. Hence, you can plan your children’s future, you and your spouse’s retirement, etc. easily.

Tax Saving

For people who are earning, they can reduce their tax amount by purchasing life insurance. Many don’t know that they can save tax with life insurance. Some sections under the Income Tax Act of 1961 help you with tax benefits.

Here are the tax benefits of buying life insurance-

  • Section 10(10D)

Under Section 10(10D) of the Income Tax Act of 1961, a life insurance policy’s returns are tax-free.

  • Section 80C

When you buy life insurance for you, spouse, or children, you can claim a deduction for the premium that you pay for the policy. The deduction of up to Rs. 1.5 Lakh can be claimed.

  • Section 80CCC

A tax benefit of up to Rs. 1.5 Lakh can be claimed when you pay premiums for pension or retirement policies.

  • Section 10(10A)

The pension plan’s payment that you receive when you retire is tax-free. However, only 1/3rd of it is tax-free.

  • Section 80D

Health insurance policies can help you with more tax benefits. Deductions can be claimed with the policies that you take for you, your spouse, your children, and your parents.

You can get a tax benefit of Rs. 25,000 when you buy insurance for you, your spouse, and children. However, the limit is Rs. 50,000 if you are 60 years of age and above.

Rs. 25,000 can be claimed when you buy an insurance policy for your parents. The limit is Rs. 50,000 if you are 60 years of age and above.

  • Section 80CCE

The deduction limit under this section is up to Rs. 1.5 Lakh.

The life insurance policy gives you security unlike any other investment instrument. It gives you and your family financial assistance, and at the same time, it helps you save tax.

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