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Kotak e-Term Plan is a pure term plan that provides a high level of protection to your loved ones in your absence.
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When you are buying online term insurance plan, you are investing money to secure the future of your family. A life insurance plan pays a lump sum to the nominee of a policyholder in case the insured passes away before the plan’s maturity. When investing in such a policy, you surely want your loved ones to receive as much financial security as possible. This is why a life insurance policy is the best investment tool for you.
If you have been wondering that ‘‘do beneficiaries pay taxes on life insurance’’ then you will be happy to know the Income Tax Act, 1961 allows tax benefits on the money received from a life insurance policy.
The life insurance benefit is paid only when the policyholder passes away before the tenure of the policy is over. Hence, the money cannot be paid to the policyholder. This is why, when buying a life insurance plan, the insured has to provide the name of a nominee to the insurance company. This nominee receives the benefits once a claim is made.
You can choose your loved ones as the beneficiaries or a court can assign one for the purpose.
It is quite common to ask, “Do beneficiaries have to pay taxes” by anyone who is buying a term life insurance plan. The term plan offers some amazing tax benefits under the Income Tax Act, 1961. There are multiple tax deductions to help reduce the tax liability of the beneficiaries. The tax benefits are offered under Sections 80C and Section 10(10D).
1. Benefit under Section 80C
Under Section 80C of the Income Tax Act, 1961 you can get a tax deduction on the money you pay as premium towards your insurance policy. The tax benefit limit is INR 1.5 lakh. The benefits can be enjoyed by individuals and Hindu Undivided Family (HUF) members.
If the premium value is over 10% of the sum assured then the maximum limit of the tax benefit will be 10% of the sum assured. This has been applicable since 1st April 2012. The maximum limit before that was 20% of the sum assured.
2. Benefit under Section 10(10D)
Apart from the tax deduction on the premium, the tax benefits can be availed on the money received as the death benefit under Section 10 (10D). As per this section, the nominee of the policyholder can receive the entire sum assured without having to pay any taxes on them. There is no maximum limit to the tax exemption under Section 10(10D).
When buying online term insurance, you must spend some time reading the terms and conditions mentioned in the policy document carefully to learn about the tax deductions. Understanding the benefits more closely can help you set your financial goals more effectively.
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