Insurance Plans for TAX Savings

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Mar 24

Insurance Plans for TAX Savings

Kalyani Narayanan, CEO and Principal Officer says

Since it is TAX time for all of us, I am sure you are also thinking of tax shelters.

I have spent some time looking for the best 'single payment' insurance plan that one could invest in and claim tax deduction under Sec 80C.

I have put together this comparison chart that you can find by CLICKING HERE.

If you are also looking for such tax shelter, you may find this useful.

Single Invest Plans are ideal for those who:

Don't want committment to pay every year.
Travel often so cannot remember when the premium is due every year.
Have got some one time cash, like Maturing bank deposit, or chit fund, or sale of some property
Are businessman where you may not have regular cash flow to pay premium every year

Please keep in mind the following as you look at this enclosed document.

I am suggesting these policies only from the TAX Savings/investment point of view and NOT from LIFE Insurance point of view. These are market linked policies, meaning that your investment is subject to market risks.
The Act says that you NEED to take at least 5 times of your premium during the premium paying year for life cover (aka Sum Insured) if you want the entire allowed amount (up to Rs. 1 lac) be tax deductible under Sec 80C and by doing so, the money you get back at the end of the term (say, 10 years) will also be TAX FREE under Sec (10(10D)).
Please note that the sample illustration I have given assumes a constant 10% as the performance of the fund. By keeping the performance constant, you are able to see which company's charges are high and which company's charges are low - The higher the return the lower the charges.
If you really DO NOT want to actively manage the fund, then look for companies that offer balanced fund or funds that come with "Stop Loss" option. I can further help you with this later on if you need.
If you are older than 30 years and have children, consider taking the plan under your children's name so that the mortality charges would be minimal leaving most of your money for investment.
If you look at the sample illustration, Met Life and LIC figure as top companies in the Single Invest category as far as minimum charges and/or loyalty bonus are concerned.

THINK ABOUT THE FOLLOWING SCENARIO:

Let us assume that you are 35 years old. Every year, you invest in one single premium policy of Rs. 1,00,000 that is locked for 10 years. Say, you keep investing every year till you are 44 years. Then, from your 45th year onwards, you would be getting 100% TAX FREE money every year till you are 54 years because the money you paid when you were 35 years would come back to you when you are 45, what you paid at 36 would come to you at 46, and so on. By reinvesting this again and again (twice) till you are ready to retire (say 65 years) you get handsome TAX FREE return of Rs. TEN lakhs every year till you are 75.

I worked this out. For investing Rs. 1 lakh per year for 10 years (35 – 44 years of age), and reinvesting it twice(45-54 and again from 55-64, you will get about Rs. 10 lakhs per year (during 65 – 75 of age) for 10 years – ALL TAX FREE !!

Remember PENSION FUND IS TAXABLE!

But THIS IS TAX FREE.

Interested? Write me back. I would love to serve you and get your business.

kalyani@easyinsuranceindia.com

www.easyinsuranceindia.com