Is Insurance The Right Option This Tax Season

The financial year is at an end and most people are busy with yearend work load. However, another nagging variable which is common to all is tax planning to reduce the net taxes payable to the government. Many may have already done a forecasting and accordingly planned out money management in a manner so as to facilitate the deduction securing investment purchases.

One of the most popular investment purchases this tax season is good old insurance investments. There are many who are saying that the best option is insurance and tax services providers are also swearing by them. The budget for F.Y: 14-15 brought in an increment in the ceiling limit to claim deductions under section – 80 C of the I.T. Act, 1961. The limit is now Rs. 1, 50,000/- from Rs. 1, 00,000/-. Thus, the reason for choosing or not selecting insurance as a means of reducing tax this year could be the following:

•    During tax planning time, most are looking for a simple and safe option for investing the money and secure the proof for the payroll team to secure the tax benefit. However, in order to do the same one often finds insurance as the last resort no matter the need and suitability which in reality is absent.

•    It is also essential to know that a new plan and a packaged product are different. A combination of already available options is a packaged product. Insurance in this case a tax saving investment option is suitable for those looking for limited post retirement support plus children’s education from a single window.

•    Many insurance companies today are providing tailor made solutions to meet the varying needs of customers. There are customers who seek risk coverage while others seek lump sum periodic pay outs.

•    Many experts feel traditional insurance plans are an ill structured source for saving tax. They have lock in periods with multi year fixed commitments along with poor returns. The payout happens after a long time and early withdrawal or failure of premium disbursement also draws penalties.

•    The good thing about income from insurance is that it offers tax free income on maturity. However, even for that the premium must not exceed in any year 10 percent of the sum assured in order to remain eligible for tax exemption. Hence, one must be careful of the same at the time of purchase or revisions in policy terms.

Thus, whether insurance is the right option this tax season is dependent on personal goals and long term financial plans of an individual.

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