This may come as a surprise, but there are numerous tax benefits of a life insurance policy. If you are a fit and sound person, this may be the best asset class to invest in.
What is life insurance?
Before anything, let us first understand what life insurance is. This is an agreement between the insurance company and the insured to provide him/her with financial coverage in exchange for his/her money. The payment that you will make to the insurance company is called the premium. In case, you died during the tenure of the policy, then the insurance company would provide a lump-sum amount to the nominee.
What are the tax benefits under this scheme?
If you already have life insurance in place, then you would be enjoying an attractive tax benefit. If you don’t have one, what are you waiting for! Go ahead and buy one.
According to Section 80C of the Income Tax Act, 1961, an insurer can enjoy tax benefits of up to 1,50,000 per year on the premiums paid to the insurance company.
This is not the end of the game. You also get tax deductions on the payouts. The money that the nominee would receive in case of the sudden death of the insurer or the maturity money that the insurer receives is also exempted from tax.
The best part about these tax benefits is that there is no cap on them. No matter if your maturity amount is 1 lakh or 10 crores, you would enjoy tax benefits in both the cases. However, the premium paid should not be more than 10% of the sum assured.
The final amount can be a bonus, surrender value, survival benefit, death benefit, or a maturity benefit.
To sum up
The tax benefits that come with life insurance policies make them one of the most sought after investment plan. LIC tax saving plan is the best tax saving scheme. If you have yet not opted for insurance, you must do it now. This is as important for the future of your children as their education.