Insurance is popular not only for its benefits but also for its tax saving nature. Whether you buy life insurance or health insurance you get tax saving on both. In fact, in a life insurance policy, even the surrender value is tax-free in your hands. However, when it comes to taxation, there are certain rules which should be kept in mind. For health insurance plans there are limits up to which you can claim a tax exemption. Furthermore, for the surrender value of a life insurance policy, there are certain conditions which, if fulfilled, will result in tax relief. Let’s explore these tax facts of your health and life insurance plans –
Tax benefit for health insurance
Premiums paid for a health insurance policy qualifies for tax exemption under Section 80D of the Income Tax Act. The maximum exemption which you can claim for the premiums paid is up to Rs.60, 000. Here’s how –
So, if you and your dependent parents are both senior citizens and you pay premiums for two separate health insurance plans (one for yourself and one for your dependent parents), you can claim a maximum tax exemption of Rs.60, 000 in one year.
Tax benefit on the surrender value of a life insurance policy
If you surrender your life insurance policy and avail the surrender value, the value can be claimed as a tax-free income. However, to avail this tax exemption, you have to fulfil the following conditions –
- For your single premium policies, if you surrender the policy after the first two years of buying the plan, the surrender value you receive is tax-free.
- If you have a regular premium plan, the surrender value is tax-free only if you have paid the premiums for the policy for at least 2 full years.
- In case of Unit Linked Plans, the surrender value becomes tax-free only if the policy is surrendered after 5 years.
- For your pension plans, the surrender value is always taxable. It is taxed at your income tax slab rate in the year in which you receive the value.
So, if you want to surrender your life insurance policy, find out the type of policy you have. Then determine whether the qualifying conditions have been fulfilled so that you can receive the surrender value without any tax implication.
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Tax is a complicated subject where there are various qualifying conditions and limiting amounts. Even though your life and health insurance plans promise you tax benefits you should read the fine print of availing this tax benefit. You would not be in for a surprise when you know the tax relief you would get, right?
Turtlemint helps you in buying the best life insurance policy and health insurance policies. It also helps you with your queries regarding the tax aspect of these plans. So, if you are planning on investing in life insurance, health insurance or both, come to Turtlemint. You would be surprised with the experience you get.
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