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Life insurance is one of those things you know you should have, but you often push it to the bottom of your priority list. We understand—no one likes to think about what happens after they're gone. But the truth is that life insurance is not only about covering accidental death. It is a financial safety net, a tool for wealth creation, and the easiest way to secure your loved ones’ dreams long after you are gone.
If you still think life insurance is just receiving a lump sum when your loved one passes away, you are missing out on some truly incredible benefits. So, read this Canara HSBC Life Insurance blog to go beyond the basics and explore what life insurance has in store for you.
Key Takeaways
Life insurance is not just financial protection; it’s also a tax-saving tool under various sections of the Income Tax Act.
Section 80C offers tax deductions up to ₹1.5 lakh on premiums paid for life insurance.
Maturity and death benefits are fully tax-exempt under Section 10(10D).
Section 10(10A) provides tax benefits on commuted pension amounts.
Pension premiums qualify for deductions under Section 80CCC within the ₹1.5 lakh limit.
Customisable plans like the iSelect Smart360 Term Plan provide flexibility along with tax advantages.
A life insurance policy is usually the first investment made by a person when they begin working and earning for themselves. Everybody wants to protect themselves as well as their loved ones in case something happens to them. And, a life insurance policy is usually the best way to guarantee this.
A life insurance policy has a range of benefits, the most important being that it ensures your family and dependents can continue their standard of living even if you are no longer around to provide for them. You can choose from a variety of situations, and ensure that your policy remains equipped to deal with them, regardless of the situation that may befall you. You can also choose to have the entire sum assured paid out to your dependents as a lump sum amount or in instalments as a form of income.
You can opt for the iSelect Smart360 Term Plan by Canara HSBC Life Insurance, which allows you to customise your insurance policy according to your requirements at very cost-effective premium rates. Both coverage and terms of premium payments can be tailored according to your personal needs.
One major reason that life insurance policies continue to be one of the most sought-after investment instruments is the tax benefits available with them. Life insurance tax benefits cover some of the best tax provisions available under the Income Tax Act, 1961.
Read on below to learn more about life insurance tax benefits and the relevant sections pertaining to them.
Section 80C
This section specifically talks about tax provisions available on the premiums paid by the policyholder towards their insurance policies. Section 80C allows for tax exemptions on premiums paid towards life insurance policies. Since total deductions up to ₹ 1.5 lakh is allowed under this Section, which is one of the best life insurance tax benefits available to policyholders.
However, to claim this benefit, you need to ensure that your premium amount is not more than 10% of the total sum assured. For instance, if the sum assured of your policy is ₹. 10 lakh, you should pay ₹ 1 lakh in order to avail this benefit under Section 80C. For maximum benefits, consider investing in the iSelect Smart360 Term Plan by Canara HSBC Life Insurance. Not only will you be eligible for tax benefits, but you will also receive a range of other benefits, including the option to add your spouse at a discounted premium rate to the same policy.
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Section 10(10D)
Section 10(10D) of the Income Tax Act, 1961 pertains to the benefits received through a life insurance policy. Since there are no maximum limits to this benefit, any amount received under this Section is completely exempt from taxation. Additionally, this benefit could be anything ranging from a death benefit to a maturity benefit or even the benefit received for surrendering the policy.
However, if you choose to surrender your insurance policy, there are a few other things you should keep in mind.
The surrender benefit is exempted from taxation only if the policy is surrendered after the completion of 2 years. This is valid on traditional life insurance plans with a single premium.
With a regular premium policy, you are eligible for tax exemption on the surrender benefit only if the premiums have been paid for at least 2 years.
If you have opted for a Unit Linked Insurance Plan (ULIP), you can only surrender the policy after the 5-year lock-in period has been completed to receive the tax benefits
Did You Know?
The origins of modern insurance can be found in the London Fire of 1666. Due to the severity of the fires, insurance became essential rather than optional.
Source: Investopedia
Section 10(10A)
This section of the Income Tax Act, 1961, relates specifically to pension plans, whether as part of a traditional life insurance policy or as a ULIP. If you are a government employee, all of your commuted pension is tax-free. On the other hand, if you are a non-government professional who has received a gratuity, one-third of your pension is tax-free. In case you haven’t received gratuity, half of your commuted pension is exempted from tax owing to Section 10(10A). Since the rest of the corpus is paid in the form of annuity, these are not tax-free.
Section 80CCC
Section 80CCC also relates to pensioners, and more specifically, to the premiums paid towards the pension or annuity plan. Under this Section, the premiums paid are exempted from taxation up to a maximum limit of ₹. 1.5 lakh, but it also includes the benefits under Section 80C. Thus, if you are paying premiums towards a pension plan, your maximum limit of tax exemption is capped at ₹ 1.5 lakh, combining both Sections.
Life insurance tax benefits are only one of the reasons why these policies are the most sought-after investment instruments. With the iSelect Smart360 Term Plan by Canara HSBC Life Insurance, you can avail a range of other benefits, including customised plans wherein you can decide your frequency of premium payments as well as the manner in which the sum assured will be paid to your nominees.
Conclusion
Life insurance provides financial protection and serves as a smart tax-saving tool under multiple sections of the Income Tax Act. With plans like iSelect Smart360 by Canara HSBC Life Insurance, policyholders gain both security and flexibility. It is a practical choice for safeguarding loved ones while optimising tax liabilities.
Life Insurance - Top Selling Plans
We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.
Sum Insured: Sum insured is the maximum cap on the costs you are covered for in a year against any unfortunate event. It is applicable to non-life insurance policies like home and health insurance.
Sum Assured: Sum assured is the amount the life insurance company pays to the nominee if the insured event happens (death of insured). This term is used in life insurance policies.
Maturity Value: The amount of money paid out when a life insurance policy matures is known as its maturity value.
Risk Transfer: Risk transfer is a strategic method where a pure risk can be contractually shifted from one party to another as part of risk management and control.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
