Life Insurance – A Solution for Saving Tax
The pains of paying income tax are something we are extremely familiar with. Millennials are, therefore, always on the lookout for smart ways to manage their tax payments.
We do know of a solution where you can not only save tax but also get a host of different benefits and that is through insurance!
I’m sure you have considered insurance at some point in the past. Having a safety net for your family provides you with a sense of relief that is incomparable. Along with the benefits of payment in case of an unfortunate incident, an insurance policy like the ICICI Prudential Life Insurance's GIFT Plan offers the flexibility to use your money by paying out at regular intervals instead of a one-time payment at the end of the policy term.
Let’s have a look at the multiple benefits of Life Insurance in detail.
Benefits of Life Insurance
- Life cover
This is the primary reason to buy an insurance policy. It is to ensure that if you were to encounter any unfortunate event, your family will have a lump-sum financial pay-out to rely upon.
- Regular income source & flexibility
Some policies like the ICICI Prudential Life's GIFT plan offer the flexibility to start receiving returns from the second year of the plan itself. This benefit is ideal for millennials who not only want to save on tax but also wish to have the flexibility to use their money.
The plan offers are a wide range of premium payment and pay-out options to choose from. You can choose to make a one-time life insurance premium payment and then enjoy regular income for the next 9 years. You can also choose to make regular yearly payments for 7-10 years and then enjoy regular income for up to 20 years.
Example: Saurav is a 35-year-old male, paying an annual premium of 1 lakh in ICICI Pru Guaranteed Income for Tomorrow. He wants to create a source of income that starts off from the very next year to take care of his son’s school fees.
With this plan, Saurav has the flexibility to receive the Guaranteed Income either annually or every month during the Income Period.
Guaranteed Income on an annual basis for a premium payment term of 10 years is 1,36,952. If he chooses to receive this income every month, the amount will be 1,41,061 for the whole year i.e., he will receive 1,41,061/12 = 11,755 every month for 10 years.
This particular benefit is ideal even if you take into account the current COVID-19 scenario for instance. So many people have lost their jobs and all their savings. In times like these, having a regular dependable source of income that is not influenced by the market conditions is a game-changer.
- Loan option
Many insurance policies offer the provision to take out loans against your policy in times of need. In these cases, the policy itself acts as an asset.
In most policies that offer this facility, you can take a loan of 80% of the total surrender value of the policy.
Quite ideal, isn’t it?
Insurance is such a multifaceted gem; it gives you a fall-back option no matter what happens.
- Tax benefits
Though a side benefit of insurance, the tax-saving implications are some of the most attractive points for millennials.
Tax Benefits Pertaining to Life Insurance
The tax benefits that you can claim through life insurance originate from section 80C of the Income Tax Act. This section offers certain exemptions on the amount that you pay as a premium for your insurance policy.
What does this mean?
The amount that you pay as a premium essentially gets deducted from your taxable income. This means, you only have to pay income tax on the remaining amount. Under section 80C, you can claim up to Rs. 1,50,000 as exemption. This, therefore, means that the more you pay as an insurance premium, the more exemption you can claim.
Apart from that, there are additional benefits offered by section 10(10D) of the Income Tax Act. Accordingly, the maturity amount or the death benefit received from life insurance policies is completely tax-free!
Considering the fact that you have to pay capital gains tax on most other forms of investment, the tax benefits offered by insurance policies are definitely the cherry on the cake.
If you haven’t gotten yourself an insurance policy yet, hurry up and get covered today!
Kyuki agar tayari sahi ho, toh jeet paaki hain! - In association with ICICI Prudential Life Insurance!
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