People are considering choices that may help them improve their wealth, preserve their family’s finances, and possibly even save taxes as the new fiscal year gets started. While investing instruments including mutual funds, PPFs, FDs, and NPSs may help individuals build wealth and save taxes, a variety of insurance products in the life and health insurance categories can help consumers protect their assets while also saving taxes.
In accordance with Section 80D of the tax code, policyholders who buy health insurance can deduct up to INR 25,000 from their taxable income for their own coverage as well as that of their spouses and dependent children. The policyholder may also be entitled to a deduction of up to INR 50,000 if the parents are over 60, and INR 25,000 if they are under 60.
Policyholders (under Hindu Unified Family) who pay for any handicapped family member are eligible for Section 80D exemptions of up to INR 1.25 lakh. Under section 80D, individuals can also receive a tax exemption of up to 5000 INR for preventative health examinations; this tax exemption may be requested on behalf of the policyholder or of his or her spouse, children, or even parents.
Under Section 80C, a person can claim a tax deduction of up to INR 1.5 lakh on premiums paid for life insurance contracts. These plans cover the individual, his or her spouse, and their children, thus they are all eligible for this deduction. However, keep in mind that in order to qualify for a tax deduction, the life insurance policy must have a minimum term of 5 years.
The government has also amended the tax laws governing ULIPs, with the proceeds from ULIPs losing their tax-exempt status if an individual’s total premiums for all ULIP policies owned exceed INR 2.5 lakh annually, as defined under Section 80C.
While life and health insurance plans can help customers save money on taxes, they should not be purchased only for that purpose. Both life and health insurance are necessary for protecting a person and his or her family in the event of an unanticipated calamity.