Tax saving is an important part of your financial planning every year. Your tax-saving strategy should not only save you tax but also help you build a corpus of funds. To achieve that objective, you must consider investing in insurance plans. You can begin using the income tax calculator to see how much you will save by investing in a certain insurance policy. Remember that there are several tax benefits of term insurance and other life insurance policies that will enable you to make the most of your investment. This article will talk about several insurance plans and their tax benefits to help you make an informed decision.

Life Insurance

Life insurance is considered to be a robust tool for people who are looking to secure their family's financial future and protect them from eventualities, especially if you are the sole earning member. However, it not only helps the family stay afloat after the policyholder's demise but also helps the insured person leverage the tax benefits. Under section 80C of the Income Tax Act, 1961, life insurance premiums up to Rs. 1.5 Lakh are eligible for a tax rebate. You can choose from a wide range of life insurance policies, such as term insurance endowment plans, ULIPs, etc., all of which allow you to save tax along with providing you with a comprehensive life cover. Moreover, the death/maturity benefit received as part of your life insurance policy is also tax-free under section 10(D). At the same time, you must note that if the policy is terminated before the stipulated time or the lock-in period, the proceeds become taxable as they are included in your income. Use tools like an income tax calculator to see how much taxes your life insurance policy will save you.

Health Insurance

A financial portfolio is incomplete with a comprehensive health insurance policy. With the rising costs associated with hospitalization and healthcare, it is advisable to get health insurance for not just the tax benefits but also the protective cover it offers you in times of accident or critical illnesses. Needless to say, it also acts as a valuable instrument to save tax. Health insurance premiums are also covered under section 80C of the Income Tax Act. A young adult can get a rebate of up to Rs. 15,000 on their health insurance premiums. But a senior citizen over 60 years of age can claim up to Rs. 20,000 in tax rebates. Additionally, the maturity amount received is tax-free that falls under the policy of critical illnesses. People with two health insurance plans in the family, one for themselves and one for their parents, can claim cumulative tax benefits up to Rs. 35,000. You can check the websites of reliable insurance providers, such as Max Life Insurance, to see the various health insurance plans. Don't forget to use the tax calculator to accurately calculate the tax savings before investing.

Pension Plans

Even though health and life insurance are a must-have in anyone's financial portfolio, it is also important to invest in a pension plan that will give you extended financial security. You can also avail of tax benefits under section 80CCC of the Income Tax Act. Also known as annuity plans, pension plans are just like life insurance policies. However, unlike a pure life insurance plan that only protects your family's financial interests following your death, a pension plan will give you a secure future for yourself and your loved ones. It offers you a consistent income to help you live through your retirement years in a financially sound manner.

Term Insurance

Term insurance is probably one of the cheapest and the most basic of all life insurance plans. The premiums are low, and you get a large cover for a lower price. At the same time, it is also a tax-saving tool that can help you save some money in taxes for the time you remain invested. All term insurance plans are a great way to insure yourself and your family against life's uncertainties. Using an income tax calculator is an effective method to see how much tax you can save for a certain amount of premium. It is the type of life insurance that gives your life cover for a certain number of years. In case of your untimely passing within the policy term, the policy nominee becomes entitled to a tax-free sum assured under section 10 (10D). However, the premium should not exceed 10% of the sum assured to avail of that benefit. Additionally, your term insurance premiums are eligible for a tax rebate of up to Rs. 1.5 Lakhs under section 80C of the Income Tax Act. While insurance policies are necessary to build an expansive financial portfolio, don't invest in them for the sole purpose of saving tax. Don't forget that the primary purpose of an insurance policy is to protect you and your loved ones from unpredictable events. Therefore, it should be added to your portfolio only if they make financial sense. Apart from offering you a risk cover, these insurance policies also give you the requisite tax benefits, thereby acting as an effective tax-saving tool. All insurance providers offer online tools, such as an income tax calculator, to help prospective buyers see exactly how much tax they will save by investing in a policy. Nevertheless, be sure to thoroughly educate yourself about these provisions, with regards to tax savings and how to file your taxes to leverage this benefit. It would help if you also kept yourself updated about the amendments that may get introduced to the Income Tax Act, year on year.