One vital additional advantage of life insurance is the tax benefit on premium paid for a life insurance policy. One should understand each aspect of claiming this tax benefit to avoid losing it. We will briefly examine some vital points of the current income tax laws.
As per the tax laws, an individual can claim a total deduction of up to Rs. 1.5 lakh under Section 80C on premiums paid towards life insurance policies for himself/herself, spouse and dependent children. The individual can also claim exemption from tax of up to Rs.25,000 under Section 80D on premiums paid towards health insurance for himself/herself, spouse, dependent children and parents.
To avail tax benefits, you must purchase a good insurance plan offered by various insurance firms in the form of a term plan, traditional savings and protection plan, whole life plan, ULIP, or as a pension plan. Purchasing insurance policy secures your family financially and enables to accumulate tax savings for a lifetime. Moreover, some pension policies also include a life insurance element, but since they're treated differently for tax purposes, they won't be considered here.