Written by Tarun Mathur
Every yr throughout the months of December – March, the taxpaying inhabitants of India is looking out for figuring out one of the best methods that may assist them save taxes. As per the Income Tax Act, 1961, any Indian citizen aged beneath 60 years is liable to pay tax if their annual revenue exceeds Rs 2.5 lakh.
There are a number of tax financial savings choices accessible available in the market that may considerably cut back your tax legal responsibility legitimately. However, as a substitute of randomly choosing any tax-saving instrument that you could be really feel will assist you to save important tax, it is very important select choices which can be the correct match in your age and promise you long run advantages.
One such choice is Insurance. Apart from offering complete monetary safety when wanted, it additionally lets you save tax every year. By investing in numerous insurance coverage merchandise, you save tax below Section 80C and Section 80D of the Income Tax Act.
Let’s check out a few of the well-liked tax saving insurance coverage merchandise that may assist you to to save lots of a bit of your tax funds legally and supply monetary safety to you and your dependents in opposition to any unlucky occasion.
Section 80C
Section 80C of the Income Tax Act 1961, reduces your tax liabilities by permitting deductions out of your complete taxable revenue in a monetary yr. Currently, the utmost deduction allowed in a monetary yr below Section 80C is Rs 1,50,000.
One of probably the most wanted insurance coverage product that helps you avail tax profit below Section 80C is Term Life Insurance – a pure safety plan. A time period life insurance coverage coverage pays out the complete sum assured to dependents on the premature loss of life of the policyholder. Premiums paid in direction of insuring self, partner and dependent youngsters are eligible for a tax rebate.
If a life insurance coverage coverage has been issued on or earlier than March 31, 2012, the annual premium of as much as 20 per cent of the assured sum is exempted. For insurance policies issued on or after April 1, 2012, premiums as much as 10 per cent of the sum assured are tax-deductible.
An distinctive advantage of investing in a time period life insurance coverage coverage is that the payout (sum assured) obtained by the dependents on the loss of life of the life insured is totally exempted from the revenue tax deduction.
Apart from time period life insurance coverage, you might also select to put money into new-age Unit Linked Insurance Plans or fourth-generation ULIPs. Quite well-liked amongst folks for minimal expenses, higher transparency and tax-free maturity profit, ULIPs may be purchased for a time period of 15, 20, 25 or 30 years relying upon your monetary purpose. ULIPs are one of the best choose for folks with a low-risk urge for food in search of secure funding choices.
Section 80D
Under Section 80D of the Income Tax Act, the utmost quantity as much as which you can also make declare deductions is Rs 1 lakh. This part of the Income Tax Act is devoted to contributions made in direction of shopping for medical insurance coverage for self, partner, youngsters and fogeys.
You are allowed to say a most deduction of as much as Rs 25,000 in a given monetary yr for getting medical health insurance for your self, your partner and your youngsters. However, in case you are a senior citizen, you’ll be able to declare a most deduction of as much as Rs 50,000 on a medical health insurance coverage.
If you purchase medical health insurance in your mother and father as nicely, you’ll be able to avail a further tax advantage of Rs 25,000 in case your mother and father aren’t senior residents and a further tax advantage of Rs 50,000 if the mother and father are senior residents.
In India, a person qualifies as a senior citizen on finishing 60 years of age. Overall, if you are going to buy a medical health insurance plan for your loved ones in addition to your mother and father (and each, you and your mother and father are beneath the age of 60), you’ll be able to declare a most tax deduction of Rs 50,000. If each you and your mother and father are above the age of 60 years, you’ll be able to avail of a most deduction of Rs 1 lakh.
Maximum financial savings with Insurance
By investing in tax-saving devices below each Section 80C and Section 80D of the Income Tax Act, you’ll be able to avail the utmost tax rebate in your complete taxable revenue. For occasion, in case your annual revenue is Rs 10 LPA, by taking most benefit of each the sections, the taxable revenue may be lowered to 7.5 LPA.
Conclusion
Before selecting any tax-saving instrument, it is very important issue within the returns it guarantees as there isn’t a level in choosing a tax-saver product that doesn’t fit your and your loved ones’s wants. It is necessary to remain up to date in regards to the newest developments in tax-saving provisions and the completely different merchandise that may considerably cut back your tax burden.
The writer is the CBO at Policybazaar.com. Views expressed are that of the writer.
