What are Guaranteed Savings Plans?
A guaranteed savings plan is certainly an affordable solution that offers the dual benefits of life cover and guaranteed returns on investment. It will provide a lumpsum amount when the plan matures, along with guaranteed additions on cumulative premiums. Guaranteed additions can be interest amount, bonuses etc. Additionally, the plan pays out a death benefit to the family in case of the policyholder’s death.
To make the prospects of having a guaranteed return plan even more attractive, the Income Tax Act, 1961 has introduced tax exemptions and deductions on this savings plan. Guaranteed returns plans enjoy tax benefits under Section 80C, Section 10(10D) and Section 80CCC of the Indian Income Tax Act, 1961 subject to certain conditions.
Let us understand how we can save tax with the best guaranteed savings plan.
Save Tax with the Best Guaranteed Savings Plans
Life insurance guaranteed plans such as endowment policies, monthly income plans and money-back plans have an insurance cover and a savings benefit. Here, the policy holder can save by paying a fixed amount regularly. On the maturity of such policies, the policy holder will get the sum assured and in the absence of him due to sudden death, the nominee will get the lumpsum amount.
Following are the major tax benefits of guaranteed savings plans:
- Tax deduction for premium paid under Section 80C:
The premiums paid on such policies will qualify for tax deduction under the Section 80C of the Income Tax Act, 1961 subject to conditions mentioned in said section. The maximum deduction that can be claimed is ₹1,50, 000. It can be claimed for the premiums planned and paid for insuring self, spouse or children.
- Tax Exemption for maturity benefits and other bonuses under Section 10(10D)
According to Section 10(10D) of the Income Tax Act, 1961 exemption can be availed from paying taxes on the amount received from the life insurance provider. The total amount of sum assured along with any bonuses received on the maturity of the policy is tax free subject to certain terms and conditions.
- Tax exemption for the death benefit payout under Section 10(10D)
Additionally, Section 10(10D) ensures that the death benefit paid out to the nominee upon the policyholder’s demise Is completely exempt from any taxation except Keyman Insurance Policy
- Tax deductions for annuity-based guaranteed pension plans under Section 80CCC
According to Section 80CCC, amount paid for annuity-based savings plans for receiving pension amount can also be claimed for tax deduction. The maximum amount available for deduction in this section is also ₹1,50,000.
Investments and Savings are vital for financial security and growth. We have to strategically plan our financial goals on a long-term basis and work out solutions. When there are applicable tax deductions and exemptions, it is important that we make use of them in the best possible manner.
As discussed, guaranteed savings plan offers tax benefits. These plans are affordable and beneficial at the same time. Take some time to analyze your financial commitments and plan your expenses. Ensure to set aside a specific amount to invest on such plans, to assure returns, avail tax benefit and get financially secure!
Tax implications enumerated in this article are based on our understanding of tax laws. Customers are advised to consult their tax consultant before taking any final position.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details
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