How to make the most of tax benefits by investing in insurance products? MintGenie explains

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₹1.5 lakh. This not only significantly lowers your taxable income but also results in savings on your tax expenses. An important benefit of term life insurance is that the death benefit received by the policyholder’s family in the event of their untimely demise is entirely tax-exempt under Section 10(10D) of the Income Tax Act, 1961.

This guarantees that your loved ones receive the entire amount without any tax obligation, offering essential financial support during a challenging period. While conventional term plans lack a maturity benefit, numerous contemporary term plans now incorporate a “return-of-premium" feature. Essentially, if the policyholder outlives the policy term, they will receive a lump sum amount equal to all the premiums paid (excluding GST).

This introduces an extra layer of financial advantage to the inherent protection provided by term insurance. Insurance-cum-investment plans provide a blend of life coverage, returns, and tax advantages. The premiums paid for these plans are eligible for tax deductions under Section 80C of the Income Tax Act, with a yearly limit of ₹1.5 lakh.

This has the potential to lower your taxable income and result in tax savings. An exemplary illustration of such plans is Unit Linked Insurance Plans (ULIPs), which provide a distinctive blend of life insurance protection and the opportunity for wealth creation through investments linked to the market. The maturity benefit derived from a ULIP is exempt from tax under Section 10(10D) of the Income Tax Act, provided that the annual premium paid does not surpass ₹2.5 lakh.