Tax Exemption on Insurance Premiums

Most salaried individuals would have received emails from their office HR department regarding submission of tax-saving investments for this financial year. You would also be getting calls from your insurance agent to buy various kinds of insurance plans to help you save taxes. Buying insurance can be a good idea for not only the young but middle-aged people as well. But what kind of insurance you buy is an important aspect to consider.

Go for life insurance policies

In most cases, insurance agents will try to sell you a unit linked insurance policy. More commonly known as ULIP, these polices have a mix of insurance and investment. ULIPs are generally sold aggressively as the best of both worlds–insurance and investment. However, they are not an ideal product for everyone.

If you really do want to invest in an ULIP, you need to give it proper thought and consideration. Right now, with the financial year drawing to a close, any tax-saving attempt you will make will be a rushed one. At such a time, it is best to avoid ULIPs. Tell your agent to come back to you in April and then you can properly understand what goes into an ULIP and maybe consider investing in one. For now, you should opt for a simple term insurance policy. Life insurance isn’t expensive. A premium in thousands can get you adequate life cover.

Tax benefits on insurance

The tax benefits of life insurance policies are plenty. Of course, the primary tax benefit is that the premium you pay is an eligible tax deduction under Section 80C. You get a tax rebate on not only the insurance premium you pay for yourself, but for your spouse and children as well.

If you have dependents, a life insurance policy is the first expense you should be making even before you begin investing. If you don’t have adequate insurance, get a new policy now and achieve that 80C deduction as well. Read here to learn about the other kinds of insurance you should have and the tax benefits they provide.

Our tax-filing website has comprehensive guides on insurance and other tax-saving deductions.

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