Usually, tax benefits on life insurance premiums are available under section 80C of the Income Tax Act.
Usually, tax benefits on life insurance premiums are available under section 80C of the Income Tax Act. However, the annual Limit of tax benefit u/s 80C currently is Rs 1.5 lakh. Apart from the life insurance premium, the section contains many other investments/expenses that contains payment of tuition fee for education of up to two children, repayment of home loan principal, contribution to PF (employee’s contribution), ULIP, PPF, and Sukanya Samriddhi Yojana Account, investments in ELSS, NSC, FD for five years or more, etc.
80C Limit
Due to many components, the annual 80C Limit of Rs 1.5 lakh gets exhausted quickly, and taxpayers can’t benefit from many other tax-saving investments.
LTC Scheme
However, due to restrictions in movement amid the Covid-19 pandemic this year (FY 2020-21), the government has declared the LTC Scheme in place of the Leave Travel Concession that allows the salaried beneficiaries to claim tax benefits on expenses made between October 12, 2020, to March 31, 2021, on purchase of good and availing services that attract GST rate of 12 percent or more instead of travel expenses.
Benefit from Life Insurance
Among the services, life insurance is also included in the LTC Scheme. However, if the benefit is already claimed on premium payment u/s 80C, it can’t be claimed under the LTC Scheme. So, in case your 80C Limit is exhausted, you may still claim benefits under the LTC Scheme. Otherwise, you must choose whether to claim the benefit u/s 80C or under the LTC Scheme.
Conditions for Claiming Benefit
Moreover, the benefit under the LTC Scheme will be allowed on premiums paid for new policies issued between October 12, 2020, to March 31, 2021, only and not on renewal premiums. So, to avail of the benefit, you must purchase a new life insurance policy – a term plan, a ULIP, an annuity, or an endowment plan.
Amid dwindling interest rates, LIC of India launches new plan with guaranteed tax-free return
Amount of Benefit
If you purchase a single premium plan within the eligibility period, you will get tax benefit on the entire premium or your maximum LTC benefit amount, whichever is lower. But for regular premium policies issued in that period, you will get help on the premium paid till March 31, 2021, provided the aggregate amount is within your LTC limit.
