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Are Endowment Policies Tax-Free?

Published On Aug 12, 2021

In an endowment policy, premiums are paid on an annual basis and the investor receives a range of returns on his or her investment.

In addition to receiving large income, endowment plans offer insurance coverage, but the list of perks does not end there. One of the most significant components of an endowment plan is the tax advantages it offers. Listed below are the several stages of an endowment plan that qualify for tax exemptions.

Are Endowment Policies Tax-Free?

Endowment plans provide investors tax savings as a consequence of their investment, which is one of the most significant advantages.

This means the investor's tax burden is reduced by reducing their taxable income by up to Rs 150,000. Section 80 (C) of the Income Tax Act allows this (Section 80C of the Income Tax Act of India is a clause that points to certain expenditures and investments).

Investors gain greatly from the tax-deductibility of premium payments that are made on a regular basis.Tax Benefits of Life Insurance

After a policy's term expires, a death benefit is paid out as compensation to designated beneficiaries. Their daily expenses are met thanks to the death benefit, which is frequently paid very shortly after the claim is made.

Tax-free payment of insurance coverage ensures that the recipients can spend the money without any hassles or problems.

Benefit Payout Tax Benefit

De plus, Section 10(D) of the Income Tax Act stipulates that the amount of the sum assured plus any bonus (i.e., the policy proceeds) received on maturity, surrender, or death of the insured are tax-free for the receiver.

Deduction Under Section 80C

Under section 80C of the Income Tax Act, you can deduct the premiums you spent to insure your own life or the lives of your spouse and children. The deduction under section 80C is permitted regardless of whether your kid is dependent or independent, minor or major, married or single. Section 80C allows both individuals and HUFs to claim this deduction. There is some confusion among taxpayers as to whether this deduction is allowed solely for life insurance purchased via LIC or not. Sadly, this is not the case. The Insurance Regulatory and Development Authority (IRDA) has allowed any insurer to offer a life insurance policy.

Bottom Line

In addition to providing the basic functions of saving and insurance coverage, an endowment plan offers tax-free payments as well. An endowment plan, we conclude from our study, is an extremely sensible investment that delivers several rewards.

Also read - How To Invest In Endowment Plans To Fulfill Your Financial Goals?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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