Maximizing Your Tax Benefits with Insurance Investments in 2023

Tax benefits are desirable for a large section of investors, and you must be no different! In fact, they are one of the main objectives behind several investments, especially in the current scenario. When it comes to your financial planning goals for 2023, you can consider investing in insurance to maximize your tax benefits. Be it a health insurance or a life insurance policy in India, here is a guide that will help you chalk out this new investment journey in 2023. Do note that these deductions are only available if you are paying your income tax as per the old tax regime. The new regime introduced in 2023 does not allow for any deductions.

How You Can Gain Tax Benefits With Insurance Investments This Year?

You can get a double benefit in the case of investing smartly, by which you can accumulate wealth for the future, along with gaining higher tax deductions simultaneously. Here are the insurance investments that will pay off greatly this year in terms of scaling up your tax deductions:

  • Life Insurance- You can get handsome tax deductions on your life insurance investments. Life insurance premiums (for a given financial year) are eligible for tax deductions up to Rs. 1,50,000 under Section 80C of the Income Tax Act. This covers various kinds of life insurance plans, including term insurance, whole life insurance, and also ULIPs (unit-linked insurance plans). The latter is especially useful when it comes to getting life coverage while investing in market-linked instruments for future returns.
  • Health Insurance- Health insurance premiums are also eligible for deductions under Section 80D. You can get deductions from your taxable income up to Rs. 25,000 and Rs. 50,000 for non-senior and senior citizens, respectively. You can get this deduction (within the overall limit) for premiums paid for yourself, your spouse, and your parents as well. In fact, you can widen the scope of coverage by adding a health-related rider to your life insurance plan, like critical illness or hospital care, in order to avail of this deduction.
  • Tax Exemptions on Life Insurance- While you can maximize your deductions with insurance investments, life insurance also gives you peace of mind that the sum assured will be tax-free in the hands of your nominees. Any payout in a life insurance policy that arises from a death claim is tax-exempted under Section 10 (10D). This section also exempts maturity benefits from other types of life insurance policies, although they are subject to certain terms and conditions.

Now that you know about the tax deductions that you can get with insurance investments, it is better to act quickly in order to secure your family’s financial future in varied situations and make your portfolio more tax efficient as well. Here is a look at some other investments that you can consider later once you have got basic insurance coverage sorted. They may also help you save taxes and maximize the deduction limits under Section 80C.

Other Investment Options For 2023

If your insurance investments are insufficient to maximize your tax benefits under Section 80C, you can also consider a few other investments. They include the following:

  • Fixed Deposit

One of the best options to save tax is by opting for tax-saver fixed deposits. They come with fixed lock-in periods and are eligible for tax deductions under Section 80C.

  • Public Provident Fund

It is a scheme promoted by the Government and is backed by guaranteed returns. It is a good path to diversifying your investment options. The annual limit for investments is Rs. 1.5 lakh, and the deductions are the same under Section 80C. The lock-in period is 15 years, and you can extend this later on if you wish. 

  • ELSS funds

It is an equity-oriented scheme that invests in various equity and other instruments through funds. It offers tax deductions of up to Rs. 1.5 lacs under Section 80C of the Income Tax Act of 1961. The lock-in period is three years.

  • SCSS Schemes

This is another option to get higher tax benefits. You can save up to Rs. 15 lacs in the same, and it gives you tax benefits as well. The minimum deposit amount is only Rs. 1,000. However, this is only applicable if you are a senior citizen.

However, all said and done; it is always wise to first secure your family financially and gain more tax benefits by adding insurance to your portfolio. Once you have adequate life and health insurance in your kitty, you can consider other options to maximize your tax benefits if needed. ULIPs (Unit Linked Insurance Plans) are hugely versatile options in this regard since they can get you both life coverage and returns from investments. Staying invested in them for the long haul can also help you beat inflation and achieve future goals. At the same time, term insurance ensures sizeable pure life coverage, which works as a major financial safety net for your family in future years. So do not wait. Get the right insurance plans for tax benefits and financial security today!


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