- Date : 09/07/2021
- Read: 4 mins
Pandemic-induced uncertainties have stoked interest in overseas stocks, and SEBI has played along.
From the popular insurance-related tax benefits to often overlooked ones, there are several sections in the Income Tax Act that provide health and life insurance tax benefits, and more. Not only is life insurance tax deductible, premiums paid towards health plans, annuity plans, and for the benefit of disabled dependents are also allowed as deductions.
Let’s take a look at these insurance tax benefits, along with the taxpayers who can avail of them, and to what extent.
Insurance-related deductions under Section 80C
One of the more well-known insurance deductions is the Section 80C deduction on the premium amount paid for life insurance plans. In the case of an individual assessee, the premium paid for the life insurance cover of the assessee, their spouse, and child are allowed as deduction. In the case of Hindu Undivided Family (HUF), the deduction is available for the premium paid on the life cover of any member of the HUF.
Besides, premiums paid towards a deferred annuity plan with LIC or any other insurer are eligible for deduction. This plan can be on the assessee’s life, or that of the spouse or children, and any member of a HUF assessee. The annuity contract must not have a cash receipt as an alternative option.
Premium paid for participation in Unit-Linked Insurance Plans (ULIPs), in the form of an investment-cum-insurance product, is deductible. This is available to the individual assessee, their spouse and children, and members of the HUF assessee. A contribution made to a notified ULIP of LIC Mutual Fund is also deductible under this section for the same set of eligible people.
Any sum paid towards a notified annuity plan of LIC or any other insurance company is tax-deductible.
To sum up, Section 80C deductions cover term insurance tax benefits, as well as life plans, endowment, annuity, and unit-linked insurance plans.
Pension fund deduction under Section 80CCC
Contributions made to specific pension funds of LIC or other insurers is available as a deduction for individual assessees under section 80CCC. These funds are mentioned in section 10(23AAB). All deductions claimed under section 80C and 80CCC (and also 80CCD) have an upper limit of Rs 1.5 lakh.
Medical insurance premium paid under Section 80D
Premium paid towards health cover, in a mode other than cash, for health insurance by individuals or HUF assessees are deductible under Section 80D. The premium can be for medical insurance, critical illness cover, and health-related riders offered by insurers. A payment of up to Rs 5,000 for preventive health check-ups is also deductible, even if paid in cash.
Here are the details of the amount of deduction allowable under this section:
- A health insurance policy covering the assessee, spouse, and dependent children is deductible up to Rs 25,000.
- An further Rs 25,000 is deductible if parents below the age of 60 are included.
- An additional Rs 50,000 is deductible if parents above the age of 60 are included
- The total deduction is Rs 1 lakh if parents, as well as assessee, are aged above 60.
Disability benefit under Section 80DD
Section 80DD allows deductions on expenses incurred by individuals and HUF assessees on a differently-abled dependent or one with disabilities. The dependent may be the spouse, parent, children, or sibling of the assessee. The dependent must not have claimed any benefit under Section 80U, which is available for a taxpayer with a physical disability.
This section is applicable for specified critical illness and health conditions that have been certified by authorised medical personnel. Apart from expenditure on the dependant’s treatment, training, and rehabilitation, any payment for any approved scheme to LIC or other insurer is deductible too.
Deduction of up to Rs 75,000 is allowed in case of a dependent with at least 40% disability, while Rs 1,25,000 is allowed for dependents with at least 80% disability.
Related: 5 lesser known facts about tax benefits of health insurance
Any expense made towards life and health insurance not only ensures the financial preparedness of the taxpayer’s family through health cover and death benefit but also promises savings in tax liability. With these deductions as a part of your IT return, you can significantly reduce your tax deducted amount during the financial year.