Life is uncertain, and a term insurance plan is the best way to deal with that uncertainty. By buying the right term insurance plan, you can secure the future of your loved ones in your absence. In case of the unfortunate event during the policy tenure, the insurer will pay the sum assured to your nominee.
While a term insurance plan plays a crucial role, its popularity is not very high in India. As per an estimation, India accounts for 17% of the world’s population. However, when it comes to protection or safety gap, it is huge. Sadly, India accounts for less than 1.5% of the world’s total insurance premium and in spite of the growing market; the insurance penetration is still low.
A transformation is required, and the government can play an indispensable role by acting as a catalyst in this direction.
To encourage the sale of term insurance plans, the government can think of giving a separate tax deduction slab. At present, when it comes to term insurance, there is no separate tax slab.
Let’s discuss the idea behind term insurance plans and the need of having a separate tax slab in details.
Term Insurance: Offering Dual Benefits= Protection +Tax Saver
A term insurance plan plays a crucial role in securing the future of your loved ones in your absence. Along with protection, it also offers tax benefits up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
There are various term insurance plans which not only cover death but critical ailments and accidental disability as well. For instance, one of the term plans available in the market is mera term plan that offers customised cover and the freedom to choose benefits. As per your needs, you can expand the cover to get coverage for critical ailments and accidental disability.
Should the deduction be separated from 80C?
Most of the people consider tax benefits while buying any insurance and investment plans. The tax benefit is an added advantage on the cover provided by the insurance company that helps them in lowering their taxable income.
However, there are various other insurance and investment products, like ULIP, PPF, pension plans, tuition fees, home loan principal repayment, etc.; which also fall under the similar section.
Term insurance plans get the maximum tax benefit up to Rs 1.5 lakh. It means, either you can avail the entire tax benefit by investing in one product, or you can buy multiple insurance & investment plans and enjoy tax benefits. In any case, the maximum tax limit will not cross Rs 1.5 lakh.
The biggest concern of taxpayers is that that the amount of deduction available under section 80C is not enough for them. After considering the premium paid for life insurance, tuition fees and other investment plans, there is nothing left for taxpayers to claim as a deduction. As a result, insurers are seeking a separate limit for the deduction on the premium paid for term insurance.
Considering the fact that term insurance is a crucial insurance plan that ensures the financial protection of the family, it would be good if term insurance is separated from Section 80C. An additional tax benefit should be offered.
If there is a tax deduction on the premium paid for term insurance, people will be keen on buying it.
Moreover, when there is a separate income tax slab for health insurance policies, term insurance plans should also have a separate income tax slab.
Though term insurance should be bought without tax benefits also, by giving a separate tax slab, the government can make it a lucrative insurance policy. It will surely encourage people to buy the adequate coverage. After all, they will get extra tax benefits by securing their family’s future, which is not a bad deal, right?