The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.
I am 45 years old and my net income per year is Rs4.6 lakh. I want to buy an insurance scheme where I can get insurance as well as tax benefits. Please guide me.
All insurance plans, be they term or unit-linked, offer tax benefits under section 80C and section 10 (10D) of the Income-tax Act. We would advise you to analyse your financial position to determine what kind of policy you require. A qualified financial adviser could help you achieve the right balance between protection and savings which, in turn, will guide you towards the most appropriate product. Since you are 46 years old, the tenure of the insurance plan should not exceed your retirement age.
Could you give me details about the tax treatment with respect to premature/partial withdrawals in the case of unit-linked insurance plans (Ulips)? If a person withdraws some money from his Ulip after three years, will it be tax free?
A Ulip plan is a long-term investment and protection product and should notbe taken with a short-term horizon.
However, if you still want to withdraw after three years (the minimum lock-in period), then the withdrawal amount is tax free under section 80C and section 10 (10D) of the Income-tax Act, 1961.
I am a 33-year-old software professional at a multinational firm. I have a term insurance and feel I am well insured. Should I then opt for a Ulip as a tax-planning financial instrument?
It is great to hear that you are confident about being well insured. However, with increasing liabilities and rising cost of living, it is advisable to undertake a financial health check to determine if all your future needs have been taken care of. Ulips give tax benefits under section 80C and section 10 (10D), offering the dual benefits of investment as well as protection. If you are looking at a long-term investment, it is advisable that you invest in a unit-linked plan as these are among the very few investment plans that are designed specifically for the long term.
Readers are welcome to write in with their queries to firstname.lastname@example.org. The questions will be answered by senior executives from leading insurance firms. This week’s expert is Bert Paterson, managing director, Aviva India.