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*Tax benefit is subject to changes in tax laws. Standard T&C Apply

Do You Know the Tax Benefits Associated with Your HDFC ERGO General Insurance Policies?

Have you ever wondered that many of us even do not cover our lives and health with an insurance plan? Well, this can be due to many reasons but let us tell you that apart from providing you financial security, an insurance policy from HDFC ERGO General Insurance Company Limited as well provides you tax benefits. Be it a life insurance plan or a medical insurance policy every insurance has some or other tax benefits associated with it. Moreover, a car insurance policy as well offers you tax benefits. Let us discuss all this in brief today. For your reference, we are starting with a scratch that is we are going to start with the basic understanding of an insurance policy.

What is Insurance?

Insurance is a contract between the insurer and you (policyholder), wherein the insurer agrees to compensate you (policyholder) in case of any financial loss due to some specific event. For this financial protection, you agree to give a certain amount to the insurance company, which is known as premium. In this way, general insurance policy is the best form of risk management. There are many types of insurance plans that HDFC ERGO General Insurance Company offers, a few of which are health insurance, life insurance, vehicle insurance, business insurance, property insurance, etc. With financial protection, you can as well claim the tax benefits over the premiums that you have paid.

Tax Benefits Associated with HDFC ERGO General Insurance Policies:

The two types of insurance policies that everyone should have in this era are – life insurance policy and health insurance policy. To make these insurance policies more appealing, the Indian government has allowed tax deductions on the premiums that you pay for these policies.

Tax Benefits of Life Insurance Policy

In a life insurance plan, the insurance provider promises to pay a specific amount. This amount of sum assured is paid to the nominee if the policyholder dies during the term of the policy. However, if the insured outlives the policy tenure, some insurance plans, such as endowment plans, whole life plans, money back plans, payout the benefit of the maturity to the policyholder. The tax benefits that you get under this type of insurance plans are:

  • Under Section 80C: The premiums that you pay for your life insurance policy qualify for the tax rebate u/s 80C of the IT Act, 1961. You can claim the maximum of Rs.1, 50, 000 as a deduction for life insurance premiums. So, the life insurance policy’s premium that you have paid against the policies for self, dependent children, spouse, and member of Hindu Undivided Family is eligible for tax deduction under this section. One important point that you should note here is – the policies that are issued before 31st March 2012, are eligible to get the tax deduction of a maximum of 20% of the total sum assured. On the other hand, the policies that are issued before or on 01st April 2012, are eligible to ger the tax deduction of a maximum of 10% of the sum assured.
  • Section 10 (10D): Section 10 (10D) of the IT Act exempts one from paying the taxes over the amount that you get from your life insurance policy. The bonus and sum assured that you get on the maturity of your insurance policy or while surrendering the policy on the death of the policyholder are free of tax but with some conditions.
  • Section 80CCC: The tax deduction under u/s 80CCC of the IT Act, 1961 is paid for the amount that is paid for any annuity plan offered by the LIC of India or other some other insurance provider for getting the pension. The maximum deduction that you can claim in this section is Rs.1, 50, 000.

Tax Benefits of Health Insurance Policy

In a health insurance policy you get cover against the surgical and medical expenses when you get injured or fall ill. The tax benefits that you get for paying the premium of a health insurance policy are:

  • Section 80D: The tax deduction that you get u/s 80D is for the claim that you pay towards paying the premium of your health insurance policy. A complete list of deductions that you can claim under section 80D of the IT Act are:

Insured Family Members

Total Deduction

Self + Family

Rs.25, 000

Self & Family + Parents

Rs.50, 000 (Rs.25, 000 + Rs.25, 000)

Self & Family + Parents (Senior Citizen)

Rs.75, 000 (Rs.25, 000 + Rs.50, 000)

Self (Senior Citizen) & Family + Parents (Senior Citizen)

Rs. 1, 00, 000 (Rs.50, 000 + Rs.50, 000)

Note:

  • The deduction of tax for a maximum of Rs.5,000 can be claimed for the expenses of preventive health check-ups and medical check-ups can be borne under the aforementioned limits.
  • A deduction of tax for the senior citizens is raised to Rs.50, 000 from Rs.30, 000 for Financial Year 2018 – 19, which was announced in budget 2018. All the tax benefits u/s 80D can as well be claimed for the premiums that are paid for riders of health insurance plans and insurance policies for critical illness. However, the premiums paid for personal accident riders and insurance policies for personal accidents cannot be considered in a tax deduction in this section.

Tax Benefit for Car Insurance Policy

It is mandatory to have a car insurance policy before plying it on the Indian roads. However, the government considers even a third-party car insurance policy valid, but it is recommended to have a comprehensive car insurance plan for safeguarding your vehicle against any damage or loss. The tax benefits that you get with your HDFC ERGO car insurance policy is:

  • If your car is primarily used for business purposes, then the premium that you pay towards its insurance policy is considered as an expense. This is because your commercial car is considered as a tool for business and there is no limitation as to how much of the premium you can claim as an expense for your car. Therefore, the amount that is deducted as tax is accommodating and generous. However, if you are using your car for your personal use, then the premium paid is eligible for a tax deduction.

Conditions Associated with Tax Benefit Claiming:

  • Even though it is possible to make the payments of the premium by cash for the health insurance plans, but as per the new rules of the income tax, you will not be able to avail of the tax benefits in such cases. It is therefore recommended to pay the premiums through internet banking, cheque, credit card, or demand draft for availing the tax benefits.
  • For claiming the deduction of tax u/s 80C, ensure that the premium that you pay during the financial year is not exceeding 10% of the sum assured. If this happens, then the benefit that you claim will be limited to 10% of the sum assured. For section 10(10D), the exemption of tax is subject to the premiums that are not surpassing the 10% of the sum assured.
  • The taxes that are deducted u/s 80C of the IT Act can easily be claimed for the years for which you have paid your premiums. If you have opted for the payment as a single installment for your life insurance policy, then you should claim the tax benefits u/s 80C for one time and that will be for the year for which you have paid the premium.

The Final Words:

So, if you have an insurance policy form HDFC ERGO General Insurance or any other insurance provider for your car, for your health, or your life, you will be able to avail of the aforementioned tax benefits. However, the information mentioned above is for illustration, and for more details, you must read the wordings of your policy and its terms and conditions.

*Tax benefit is subject to changes in tax laws  

Written By: PolicyBazaar - Updated: 14 October 2020

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