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How to save taxes from life insurance?

Mar 19, 2018 | 2 years ago | Read Time: 2 minutes | By iKnowledge Team

Depending on the life insurance policy you opt for, tax benefits are applicable on the premiums and maturity value.

Say you were promised a cricket kit or your favorite gadget if you scored exceptionally well in your exams. But you didn’t receive your assured gift because you missed your aim by a single mark. In fact, you didn’t receive as promised because you did not score above the threshold in all subjects, which was the pre-condition. You are now frustrated. This is exactly how you would feel if you purchased insurance for tax saving purposes and wound up not saving enough tax. Read on to verify whether you are getting all the tax benefits on insurance.

Tax deduction rules

Under Section 80C, you can invest in a life insurance product and claim tax benefit up to Rs. 1.5 lakh in a financial year. The product can be a term plan or a Unit Linked Insurance Product (ULIP).

Tax benefits can be incurred on medical expenses too. You can purchase a medical policy for self, spouse, and dependent children and claim a tax benefit up to Rs. 25,000 under Section 80D.If your spouse is above 60 years of age, you can avail a tax benefit up to Rs. 30,000.

Under section 80DDB, you can claim tax benefit towards medical expense of an elderly person. The limit is Rs. 60,000 for treating a person above 60 years and Rs. 80,000 for a person above 80 years of age.

Changes in Budget 2018

The total tax benefits associated with a life insurance product remains the same in FY 2018-19. However, you can save more tax towards medical expenses. The tax benefit limit under Section 80D has been raised to Rs. 50,000 from Rs. 30,000. Under section 80DDB, a tax benefit up to Rs. 1 lakh can be claimed for treating a 60 or a 60-plus-year old person suffering from specified ailments.

From 1 April 2018, your long-term profits on equity investments will be subject to tax with the introduction of the Long-Term Capital Gains (LTCG) tax of 10%. It applies on long-term gains made from selling an equity share and an equity oriented scheme like an Equity Linked Saving Scheme (ELSS). (ELSS is a mutual fund scheme wherein you invest up to Rs. 1.5 lakh in a financial year and claim tax benefits under Section 80C.)

The Tax Exemption Advantage

The LTCG tax reduces profits earned from an ELSS scheme. You can invest in a ULIP plan as the LTCG tax does not apply on it.  Some ULIP plans offer riders like the accidental death benefit, and critical illness benefit for an extra premium. These riders provide additional protection in the event of a mishap. Besides, you can also save tax. Opt for riders to make maximum use of the tax benefit offered under Section 80C. Aegon Life offers a ULIP known as the iMaximize Plan containing six different funds. These funds contain equity exposure in different proportions. You can switch the investment between different funds.

To sum it up

The number of tax sections and exemptions could get mind-boggling at times. A refresher course can help in being aware of tax structure changes. Maximize your tax savings and learn how you can benefit from it.

You can get tax breaks if you have a life insurance policy as well, provided you have add-ons like medical insurance and critical illness riders.

To know about AegonLife’s saving plans and ULIPs, visit our home page.


iTerm Plan

Life Insurance Plan with 3 Options to Choose from

  • Life Protect (Life cover till age 100 years)
  • Protect Plus (5% Automatic Increase of life cover)
  • Dual Protect (Protection + Regular Income)
iTerm Plus Plan

Life Insurance Plan with 4 Options to Choose from

  • Life Plan
  • Life Plus Plan
  • Life & Health Plan (10 Critical Illnesses covered)
  • Life & Health Plus Plan (36 Critical Illnesses covered)
iInvest Plan

iInvest Plan with 3 Options to Choose from

  • Increases Your Investment
  • Boost Your Fund Value
  • Withdraw Your Investment
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