Postal life Insurance Tax Benefits

What are the tax benefits of PLI policies?

Policyholders of PLI policies can save a significant amount of their annual income from tax deductions. PLI tax exemptions can be sought under the following sections of the Income Tax Act of India, 1969.

1. PLI Tax Benefit under Section 80C

   Under section 80C of the ITA of India, the premiums paid towards a life insurance policy are eligible for tax deductions.

   • The overall maximum deduction that can be made is limited to Rs. 1.5 Lakhs.

   • For policies issued on or before 31st March 2012, the amount of tax deduction under this section is limited to 20% of the sum assured.

   • For policies issued after, the tax benefit for PLI under 80C is limited to 10% of the sum assured.

   • These benefits are applicable only for PLI insurance policies bought for the taxpayer or his/her spouse and children.

2. PLI Tax Benefit under Section 10(10D)

   Under section 10(10D), the sum received as maturity benefit by the policyholder at the end of the policy term plan will be taxed under the following conditions -

   • For PLI policies purchased between 1st April 2003 and 31st March 2012, the annual premium amount should be less than 20% of the sum assured.

   • For PLI policies purchased after, the annual premium amount should be less than or equal to 10% of the sum assured.

   • Further, income earned as maturity benefit will be completely tax-free if the sum assured is at least 10 times the annual premium.

   • Bonuses and surrender benefits are also exempted from taxes under section 10(10D).

   Note that if the maturity proceeds exceed Rs. 1 Lakh, the insurance company will deduct a TDS of 1%.

3. PLI Income Tax Exemption on Death Benefit

   Death benefit received by the nominees of a PLI policy on the death of the life assured is tax-free under the Income Tax Act of India, 1969.

Rural Postal Life Insurance Tax Benefits

Postal Life Insurance now extends its life insurance policies to the rural population of the country. This was done to spread awareness and offer financial help to the families of the sole earning members belonging to the lower-income category. The tax benefits under RPLI policies are the same as those of a regular life insurance policy. Policyholders can claim tax deductions on the premiums paid, and the benefits applicable under sections 80C, 10(10D), and 80D of the Income Tax Act of 1969.

About Postal Life Insurance

Postal Life Insurance was initiated in the year 1884 to offer life cover to the employees of the Postal Department. Later, all its plans were extended to employees working in different sectors, be it government or private. Plans have also been introduced to serve the insurance needs of the rural population through its Rural Postal Life Insurance segment. The PLI plans are most sought after by people because of the high coverage and affordable premiums.