Income Tax News: The online insurance aggregator Policybazaar.com recently released a pan-India analysis titled “India’s Investment Readiness,” which provided insight into the current trends. Santosh Agarwal, Chief Business Officer, Life Insurance, Policybazaar.com, says the survey shows that Indians, even the younger generation, strongly prefer the previous tax system.
The Overlooked Role of Insurance in Tax Planning
Remarkably, 62% of participants in the 18–30 age range said they preferred the previous system. Although there are many investment plans on the market, insurance products also fulfil this function and are sometimes disregarded in the discussion of tax savings.
Key Insurance Choices
When choosing the previous regime, the following important insurance choices can assist save taxes (compiled by Paisabazaar):
Term life insurance
The Income Tax Act of 1961’s Section 80C allows taxpayers to claim an annual maximum exemption of ₹1.5 lakh. One of the choices under this is term life insurance.
“Offering fixed premiums over the coverage period, term plans qualify for tax rebates. The sum assured received by dependents is entirely tax-free. It’s crucial to note the premium limits based on the acquisition date, ensuring compliance with the regulations,” Agarwal said.
Unit linked insurance plan (ULIP)
ULIPs, which are becoming more and more well-liked, offer a special combination of investment and insurance with a minimum five-year lock-in period. The distribution of premiums is made up of investments in the stock market and life insurance. Sections 80C and 10(10D) of the Income Tax Act offer potential tax savings, and the fund value is fully tax-free upon policy withdrawal or five-year maturity.
Child plans
Child plans are a desirable choice for individuals who want to maximise their Section 80C savings while providing for their child’s future. “With various types available, these plans build a substantial corpus and provide returns. Transitioning from ULIP-based plans to safer funds can further enhance the corpus, offering a comprehensive approach to long-term financial planning,” Agarwal said.
Health insurance premiums (Section 80D)
Purchasing health insurance offers tax advantages under Section 80D in addition to ensuring complete coverage. For oneself, spouse, dependent children, or parents, the maximum deduction is ₹25,000. The cap rises to ₹50,000 for households with older citizens (60 years of age and up), maximising tax benefits while putting health insurance first.
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