We all pay insurance premiums – it’s a fact of life. It can be in the form of life insurance to protect your loved ones or health insurance to cover your medical expenses. They assure financial stability during unforeseen circumstances. But let’s be honest, regular premium payments can sometimes feel like a distant investment, something you will benefit from only much later in life or, worse, only in an unfortunate event.
You can take advantage of these payments now through tax benefits! You can thus get the best of both worlds: financial security for your loved ones and significant tax benefits under insurance policies on your premiums.
This article will guide you through making the most of these benefits.
Life Insurance Policies
This provides financial protection and peace of mind to your loved ones in case of your unfortunate demise. In this arrangement between you and your insurance company (insurer), the insurer will pay a predetermined sum (sum assured) to your beneficiaries (nominees) upon your death. And the good part? If you survive the policy term, you can get maturity benefits with some life insurance policies, like endowment plans and money-back plans.
Insurance Premium Tax Exemption and Deductions
As per the provisions of the Income Tax Act of 1961, you can claim a deduction of tax on insurance premiums you have paid. You can claim these life insurance tax benefits in the following sections:
• Section 80C
Premiums paid towards life insurance policies qualify for a tax deduction on insurance up to ₹1.5 lakh under Section 80C. This deduction applies to premiums paid for yourself, your spouse, and dependent children.
• Section 80CCC
Premiums paid towards annuity plans of the Life Insurance Corporation of India or other insurers for pension purposes are eligible for a tax deduction on insurance up to ₹1.5 lakh under Section 80CCC.
• Section 10 (10D)
It’s not only the premium paid. If you receive any maturity proceeds or death benefit payouts from these policies, they are also applicable for insurance tax benefits from income tax.
These clauses for tax deductions on insurance are subject to certain conditions, including:
• Canceling or withdrawing tax-exempted life insurance plans within five years will cancel health insurance tax benefits. The deducted amount will be added back to your income in the cancellation year.
Total premiums paid under Section 80C in a financial year should not be more than 10% of the sum assured.
• The assured sum should not exceed 10% of the premiums paid to claim tax exemption under Section 10 (10D).
Health Insurance Policies
These plans reimburse medical expenses you incur due to hospitalisation or critical illnesses for financial stability during health emergencies. Basically, it’s a contract between you and your insurance company. You pay the company a regular premium; in return, they will settle some or all of your medical costs.
Moreover, this premium for yourself, your spouse, your dependent children, and your parents is eligible for a medical insurance rebate in income tax. This also includes the amount paid for a health insurance policy for women, which you might have taken considering their unique needs.
Health Insurance for Tax Savings
The Income Tax Act also provides mediclaim tax benefits for the premium you have paid for health insurance. You can claim these health insurance tax benefits in the following sections:
• Section 80D
Premiums you have paid for health insurance policies covering yourself, your spouse, and dependent children are eligible for medical insurance tax benefits. An additional limit is also applicable for your parents.
The health insurance tax benefit can be calculated as follows:
₹25,000 for self, spouse, and dependent children (₹50,000 if anyone is above 60 years of age)
Additional ₹25,000 for health insurance covering parents (₹50,000 if anyone is above 60 years of age)
If you and your parents are both aged 60 years and older, you can claim a maximum of ₹1 lakh medical insurance rebate in income tax under this section. Furthermore, you can claim a mediclaim tax benefit of ₹5,000 for preventive health check-ups for yourself and your family members within the overall Section 80D limit.
However, the insurance premium should be made exclusively through non-cash modes.
• Section 80DD
Premiums paid for health insurance for your dependent family members with disabilities are eligible for medical insurance tax benefits up to ₹75,000 per year. This limit increases to ₹1.25 lakh for severe disabilities.
• Section 80DDB
Premiums paid for health insurance covering yourself or dependent family members (below 60 years) diagnosed with specific diseases are eligible for mediclaim tax benefits up to ₹40,000 per year. This limit increases to ₹1 lakh for individuals and family members above 60 years with specific diseases (neurological issues, chronic kidney failure, cancer, AIDS, and haematological disorders).
Knowledge is power. Understanding tax deductions on insurance can help you make smart insurance choices to safeguard your family’s future. Explore Future Generali’s comprehensive life insurance plans and health insurance plans to meet your unique needs and achieve financial security.
