There are several types of insurance policies which can be purchased by an individual however, insurance policies are broadly be classified into two categories i.e.
- General Insurance
- Non-General Insurance
In this article, we would be discussing the income tax benefits of both General Insurance as well as Non-General Insurance.
Tax Benefits of Life Insurance Policy
The amount paid as premium for Life Insurance Policy is allowed as a deduction under Section 80C in the year in which the premium is paid. This deduction is allowed to both Individuals as well as HUF’s.
The Service Tax levied on premium paid for Life Insurance policy is also allowed as a deduction under Section 80C. The maximum total deduction which is allowed under Section 80C for various types of payments made in a financial year is Rs. 1,50,000. It is important to note that the deduction would be allowed in the financial year in which the payment has been made and not for the year for which it has been paid.
This can be explained with the help of an example. If the premium payable is Rs. 10,000 per year and you make payment of Rs. 20,000 for this year as well as the next year – then you will get income tax deduction of Rs. 20,000 this year itself.
Apart from Income tax deduction for the payment of premium amount, the amount received on maturity of the insurance policy is also allowed as a deduction under Section 10(10D) of the income tax act.
- Recommended Read: All about Income Tax Deduction allowed for Life Insurance
Tax Benefits of General Insurance Policies
All policies such as Health Insurance Policy, Car Insurance Policy, Travel Insurance Policy, Home Insurance Policy, Commercial Insurance Policy etc are all classified as General Insurance Policies.
The most popular types of General Insurance Policies in India are Health Insurance Policy, Car Insurance Policy and the tax benefits of these insurance policies have been discussed below.
Tax Benefits of Health Insurance Policies
Income Tax Deduction for payment of premium of Health Insurance Policy is allowed as a deduction under Section 80D. The deduction allowed under this Section is Rs. 30,000 for Senior Citizens and Rs. 25,000 for Non-Senior Citizens.
This deduction is allowed to both Individuals as well as HUF and is allowed to the person who has paid the Insurance Premium irrespective of whether he has paid this Insurance Premium for himself or has paid this Insurance Premium for insuring the health of spouse or children or parents.
- Recommended Read: Tax Benefits of Health Insurance explained with examples
Tax Benefits of Car Insurance
The premium paid for Car Insurance is allowed to be treated as an expense if the car is being used for the purpose of business. There is no maximum limit on the amount of Car Insurance Premium which can be claimed as a business expense provided that the car is being used for the purpose of business.
If the car is not being used for the purpose of business and is used for personal purpose – the insurance premium paid would not be allowed to be treated as an expense. If the car is partially used for the purpose of business and partially for personal use – then the income tax deduction for payment of car insurance premium would be allowed in the proportion in which it has been used for the purpose of business.