Is SBI Child Plan a Tax-Saving Scheme?

All insurance schemes come with tax benefits under the Income Tax Act of India. If you are planning to buy a child plan, the premiums and the benefits will be considered for tax exemptions. There is however a limit to how much you can save. SBI child plans are no different. You can grow a corpus for your child while saving yourself some money on taxes.

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SBI Life child plans can help you save on taxes. Although the primary reason to get a child plan would be to secure your child's financial future, tax saving has become an important motivator for parents as well. Here's how you can use SBI child plans as a tax-saving scheme. 

What are the tax benefits of SBI Child Plans?

You can save a significant amount of your annual salary from income tax deductions every year. Majorly, you enjoy tax benefits on child insurance plans on the premiums paid towards your policy and the benefits received.

Tax-Savings Through Insurance Premiums

The premiums that you pay for an SBI child plan can be directly implicated in your income tax filing. Here are some important points to note - 

  • Tax benefit on premiums falls under Section 80C of the Income Tax Act of 1961. 

  • You can claim a maximum of Rs.1.5 Lakhs in a year as a tax benefit. 

  • The limit applies to other investments such as Public Provident Fund (PPF), and tax-saving FDs as well. 

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Tax Benefits on Maturity Benefits

All the proceeds from SBI Life child insurance plans are exempted from tax deductions under section 10(10D) of the Income Tax Act of 1961. So the death benefit or the maturity benefit that a child is entitled to on the parent’s death and at the end of the policy tenure is fully exempt from taxes.

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Taxes Levied on SBI Child Insurance Plans

Now unit-linked insurance plans earn you higher returns than any other insurance scheme because of their market-linked nature. However, there are certain charges such as the LTCG (long-term capital gains) that are levied on SBI child ULIPs. Here are some important pointers - 

  • Tax is deducted on the capital gains or profit made by you and not on the amount invested by you. 

  • If your profit from an SBI Child Plan is more than Rs.1 Lakh, LTGC is levied at 10%. 

  • If the annual premium for the ULIP is up to Rs.2.5 Lakhs, no such charges are levied. 

  • However, if the annual premium is more than Rs.2.5 Lakhs, you will be charged a flat 10% on the final fund value at the time of maturity. 

No such charges are applicable in the case of traditional child insurance policies. For a more in-depth understanding of the tax implications on SBI child plans, you should talk to tax advisors. 

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Tax savings should not be the only reason to buy a child plan from SBI Life. Your goal should be to create a corpus that is big enough for the child to finish his/her education. SBI child plans offer you opportunities to do so through its SBI Life Smart Scholar Plan and SBI Life Smart Champ Insurance Plan. Along with this, the child gets financial assistance after the death of a parent. These plans come with a lot of flexibility in terms of choosing the policy term, funds, sum assured, etc.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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