Did you know that investment plans help you to inculcate financial discipline and work towards securing your future, while saving on taxes? Yes, the right insurance plan can provide tax benefits, so that you can ensure maximum savings.
Section 80C of the Income Tax Act is amongst the most popular with taxpayers. You can avail a maximum deduction of ₹1.5 lakh annually on your taxable income. This is possible with various investment plans or by incurring eligible expenses. This includes various kinds of insurance plans as well. The premiums paid towards insurance policies are eligible for deductions under Section 80C. What are these policies? Let’s take a look.
Unit Linked Insurance Plans (ULIPs)
ULIPs, or Unit Linked Insurance Plans, offer the dual benefit of wealth accumulation and life cover to protect your family financially in case of an eventuality. A part of your premium is invested in a fund based on your risk appetite, while the returns are based on market performance. The remaining amount is put towards insurance cover. You have the potential to receive better maturity benefits in the long term. ULIPs are known for their flexibility. For instance, with Edelweiss Tokio Life Wealth Secure+, you can choose from up to 7 diverse fund options in the equity and debt markets.
ULIPs also offer tax benefits under Section 80C and maturity benefits under Section 10(10D) (subject to conditions).
Term Insurance Plans
Term insurance plans offer a large sum assured at a relatively low premium. They are pure life insurance plans, valid for a specific term. A death benefit will be paid out to your nominee in the event of your demise within that term. Many plans offer you the option to choose premium payment frequency, or get your spouse covered. You can also choose to include cover for critical illnesses, or get a premium waiver option in case you are diagnosed with a listed critical disease.
Not only do these plan protect your famiy’s financial future, but the premium you pay towards it is deductible from your taxable income under Section 80C.
If you are someone looking to plan for the golden years of your life, you can begin now and save on taxes. Retirement plans offer a steady income stream after a specific period. Apart from guaranteed income, you can also opt for a family income benefit. This means that in case of your untimely demise or a critical illness, your family receives the income pay-out benefit.
Premiums paid towards these plans are also eligible for deductions under Section 80C, up to a limit of ₹46,800 per year.
Whether you choose a Unit-linked Insurance Plan or any other plan, always understand the products in detail before investing. For instance, ULIPs have a lock-in period of 5 years. Or, when you choose a health-related rider with your term insurance policy, you can claim deductions under Section 80D too.