The importance of tax saving
What does one understand by the term, tax savings? The income that an individual earns every year is subject to the Income Tax laws governing that country. The Income Tax rates are not the same for all. The rates are fixed based on different income levels. So the total income tax an individual needs to pay depends upon the annual income he or she has earned in that given year. But, there are many ways by which one can save tax money.
So the question arises that how to save income tax? To extract maximum tax benefits, you need to invest your earnings wisely in different plans. This is where your investments come into play, as a lot of investment plans come with several benefits. With the help of tax deduction, a break granted by the government, one can save tax on premium paid and can get tax free maturity as well. You could look at long term objectives like investing in a pension plan for a life after retirement or a life cover to secure your family’s future. There are a range of tax saving plans available for individuals to gain tax benefits under various sections. This is why it is very important to carry out an extensive research and know about the different products available.
Tax saving through Life Insurance Products
To save tax, Life Insurance products play a important role. Under the Income Tax Act 1961 (Act), by investing in a life insurance plan, you are allowed to write off the premiums that you pay when calculating taxable income (subject to conditions of Income Tax Act 1961). This means, your insurance premiums are tax-exempt, the returns you earn on the policy are tax-exempt, and the sum assured paid out is also tax-exempt. Also, investing in a Life
Maturity proceed from Life Insurance comes under exempted incomes. This means, no tax to be payable on any benefits received on maturity or death Insurance Scheme can help you avail dual tax benefits.
You can also get Tax benefits on Health Insurance. This helps in reducing the computable tax base, thus resulting in reducing the net tax liability.
Tax Planning for Individuals
Let’s take a look at some of the benefits which an individual person can benefit from tax saving.
Individual/salaried with Life Insurance premium can avail tax benefits of deduction up to Rs. 1 Lac u/s 80CCE. Under section 80D an individual/salaried can avail deduction benefit up to Rs. 15,000 for self and Rs. 20,000 for dependent parents (Above age 60 years). Maturity proceeds of Life Insurance policy forms part of exempted income, that means the entire sum is completely tax free.
Tax benefits guidelines.
Premium paid for all life insurance policies (pure term, endowment & unit linked) - benefit upto 100000/- Section 80C Premium paid for all pension policies- benefit including u/s 80C & 80CCD upto Rs 100000/- - under Section 80CCC Premium paid for health insurance policies - benefit upto Rs 15000/- , in case of parents additional Rs 15000/- senior citizen (age>60 years) upto Rs 20000/- - Section 80D Maturity proceeds of Life Insurance policy- Totally exempted u/s 10(10D)
So go ahead, secure your future by investing in a Life Insurance Policy that reaps in great benefits along with making sure that your hard earned money stays with you.
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