Vivek Law: Hello and welcome to this special series - Finance Made Simple. Joining me today is Tarun Rustagi who is the Chief Financial Officer at Canara HSBC OBC Life Insurance. Thanks very much Tarun for joining in this conversation. Tarun, you know traditionally life insurance has been seen as a tax saving instrument. A lot of us you know tend to buy life insurance because we get to save tax. Even though we've recently in the budget seen capital gains tax being introduced for premiums above 2.5 lakh but what are the other methods in which I can save tax through life insurance?
Tarun Rustagi: If I covered the saving product or endowment product or a guaranteed product or maybe a participating product these are generally called traditional products and then the second category is unit linked product which is linked to you know the market or whatever you know whichever fund you select. So, on the traditional product as per Section 10 (10D) of Income Tax Act, you know it is exempt exempt exempt. So, if you invest in up to 1 lakh 50 under section 80C that premium is exempt then second portion is whatever income you earn on that that is exempted. Any receipt from these policies if you get that is also exempt. So there is a concept of exempt exempt exempt or we call it EEE in income tax. So all these products, which are actually having as per the section 10 (10D) if they are qualifying for that you have an opportunity to save tax in all these things throughout the tenure of the policy. Now in case of uh and that's that's a unique feature of life insurance product there are many other things which I'm not going to talk about. Now coming to this unit linked uh thing which recently came and if you analyze data Vivek uh you will see that a 2 lakh 50 premium is a very significant amount. It's not like a small amount right. If anyone is investing or putting a money in that so you will have a very small population which will get impacted by this particular clause. uh even if they are impacted there are some other unique features which are there in unit you know plans which are not there in other comparable financial instruments. So people who are uh you know the main purpose is investment they can still invest in these uh funds or these products and their tax can be saved. So, how I see and how I perceive uh these things um I compare the IRR which I get from investing in various instruments whether it's a money market or debt and then if I get an additional benefit of tax. So, generally all these instruments other instruments are taxed at a long term so you get a saving of um or you know sometimes it can be short-term also so but generally it's long-term so you end up saving that long-term tax and that actually increases your yield uh overall IRR uh from investing in uh life insurance products. So, this is something uh you know under 80C every year you get an exemption uh for non-life insurance premium. Under 80D you get exemption for pension premium. You get uh exemption again under a different section and for the income you're generating throughout the life of that policy that is also exempt. And when you receive the money back from insurance company uh either at maturity or some event uh then also it is exempt from tax. So, that's why it is a very powerful tool for saving the tax and also you know I uh I repeat uh or I'll say again that this is one instrument which helps you to uh create a habit of saving money right because it's like you know you have to pay it every year and so on so it helps you to save money.
Vivek Law: All right Tarun, we leave it there. Thank you very much for joining us and sharing your very detailed perspective with our viewers. Thank you.
Tarun Rastogi: Thanks Vivek and thanks viewers. Bye.
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