We have entered the last quarter of the financial year 2020-21. This quarter usually sees taxpayers planning their taxes so that they can lower their tax liabilities. As such, they pick tax-saving investment avenues and invest their money to create wealth and also save tax in the process. What about you and your clients? Is the tax planning process complete?
If you have planned your taxes it is a good thing. You can help your clients plan their taxes too by showing them the tax-saving avenues that they can choose. If, however, you haven’t planned your taxes so far, it is time to start. Plan your taxes yourself and become a shining example to your clients. You can show them that they can be Aatmanirbhar too like you. Moreover, insurance plans also have tax benefits that can help you and your clients lower your taxable incomes. Have a look –
- Benefits under Section 80C
The first benefit that is available is under Section 80C wherein you and your clients can claim deductions up to INR 1.5 lakhs. This section allows deductions on life insurance premiums paid. So, if you and your clients invest in a life insurance policy, the investment made can be claimed as a deduction under this section. Deduction is allowed on the lowest of the following amounts –
- Actual premium paid
- 10% of the sum assured of the policy
- INR 1.5 lakhs
- Benefits under Section 80CCC
This section is available if you or your clients invest in life insurance pension plans. The premium paid for pension plans is allowed as a deduction under this section up to INR 1.5 lakhs which includes the deduction available under Section 80C.
- Benefits under Section 80D
This section is for health insurance premiums as well as health insurance riders added to a life insurance policy. The limit of deduction is INR 25, 000 for a policy taken for self and family members. If you or your client is aged 60 years and above, the deduction limit would increase to INR 50, 000. Moreover, for buying health insurance for senior citizen parents, an additional deduction of up to INR 50, 000 can be availed. So, under the provisions of Section 80D, you and your clients can claim a maximum deduction of up to INR 1 lakh.
- Benefits under Section 10 (10A)
This section provides tax benefit on the commuted amount of pension plans. If you or your clients invest in deferred pension plans, on maturity, up to 60% of the corpus can be withdrawn in cash. This withdrawal is called commutation. If you or your clients choose to commute your pension corpus, 1/3rd of the corpus that you commute would be allowed as a tax-free income.
For example, say the pension corpus is INR 15 lakhs. You can commute up to INR 9 lakhs on maturity of the plan. If you commute, you can avail a tax benefit on 1/3rd part of the corpus under Section 10(10A). Thus, INR 5 lakhs would be allowed as a tax-free income in your hands.
- Benefits under Section 10 (10D)
This section allows tax exemption on the maturity benefit received from a life insurance policy. Under this section, if the premiums paid were within 10% of the sum assured of the life insurance policy, the maturity benefit received would be tax-free. You and your clients would, therefore, be allowed to claim full exemption on the benefit received from the life insurance policy.
However, if your clients buy a unit linked plan on or after 1st February 2021 and the premium paid is more than INR 2.5 lakhs, the benefit under Section 10 (10D) would not be available. Your clients would have to pay capital gains tax @10% if their capital gains from the maturity proceeds exceed INR 1 lakh.
These five sections provide extensive tax benefits on insurance policies enabling taxpayers to reduce their tax liability. You can pick life and health insurance plans to plan your taxes efficiently. Moreover, you can also lead by example and educate your clients about the tax-saving benefits of insurance plans. You can help your clients plan their taxes and offer them relevant insurance plans for protection as well as for tax planning. This would not only help your clients plan their taxes, you would be able to drive your insurance business too. So, show your clients the tax benefits of insurance plans and boost your business in the process too.