How to achieve tax efficiency through life and health insurance plans? MintGenie explains
In personal finance, taxes are a significant part of our financial lives, and it is crucial that we explore every avenue to minimise our tax liability. While investment tools like mutual funds, PPFs, FDs, and NPS are some of the mediums to save tax, insurance too can be a tax-saving medium. It is not just a protective shield, but a strategic instrument for tax optimization.
Following the budget announcement in FY 2023-2024, there have been some minor adjustments in the tax framework concerning insurance. Nevertheless, the strategic selection of insurance products can offer consumers not only a financial safety net but also potential tax-saving benefits.
In case of life insurance plans, individuals can claim a tax deduction of up to ₹1.5 lakh on premiums paid, falling under Section 80C. This deduction is usually applicable to life insurance policies covering the individual, their spouse, and children. It is crucial to note that the life insurance policy must have a minimum term of five years to qualify for this tax benefit.
There have been revisions in tax regulations concerning ULIPs as well, where the tax-exempt status of ULIP proceeds will be impacted if the total premiums across all ULIP policies held by an individual exceed ₹2.5 lakh yearly, under Section 80C.
Inhealth insurance, there's a scope for tax savings under Section 80D. Individuals can claim deductions up to ₹25,000 for their health insurance, covering themselves, their spouse, and children. Moreover, for parents aged 60 and above, this limit extends to ₹50,000, whereas for parents below 60, the deduction limit is ₹25,000.
Under Section 80D, Hindu Unified Family policyholders supporting a disabled family member can claim exemptions up to ₹1.25 lakh.
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