Section 80C: How to save tax on life insurance premiums paid

People begin discussing taxes and investments that can lower their taxable income around this time of the year. It’s vital that you only reduce your tax bill using legal means. That is where Elephant.in can help.

In this post, we’ve covered a one of the most-opted legal ways you can employ to – not only lower your tax bill but also build up a sizable emergency fund – that can protect you and your loved ones in uncertain situations.

One of these legal tax-saving options is Section 80C of the Income Tax Act, which enables you to receive tax benefits on expenses from your income up to a maximum of ₹1,50,000. Let’s take a closer look at this Section.

Life Insurance Tax Benefits in India

One of the most well-known and preferred tax-saving options is Section 80C – because it enables taxpayers to make tax-saving investments like life insurance products to lower their taxable income.

It allows a maximum annual deduction of ₹ 1,50,000 from the total yearly income.

For example, You are a 26-year-old individual, that falls under the highest tax slab rate of 30% having an annual income of less than Rs 50 lakhs. You have opted for the old tax regime.

You have purchased a term life insurance plan from Elephant.in. for an annualized Premium of ₹19,500 for a Premium Payment Term and a Policy Term of 36 years. You get a life cover of ₹ 2 crores. In the case of your unfortunate demise, your nominee will get a lump sum payout of ₹ 2 crores.

As per 30%, the tax on ₹ 19,500 is ₹5,850
+
Education Cess of ₹ 234 at 4% of ₹45,000
=
You save ₹5,616 in a year

In this way, you can save ₹5,616 X 34 years (premium paying term) = ₹ 2,02,176

Additionally, you get the following benefits from a term life insurance plan:

• Life cover  of over ₹ 2 Crore
• You save ₹ 2.02 lakhs in tax benefits under Section 80C
• Get tax-free pay-out under Section 10(10D)

Suggested Read: How much term insurance cover do I need?

It’s almost the end of third quarter of the current financial year and is the right time to start planning your investments for the year and save some of your hard-earned tax money.

You can visit Elephant.in to choose your preferred insurance company, compare various plans and buy the one that best fits your requirements.

Tax Disclaimer: Tax benefits are defined by the Income Tax Act of 1961 and are subject to any future changes. It is suggested that you consult with a tax consultant.

Source: https://incometaxindia.gov.in/