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Postal life Insurance Tax Benefits

Postal Life Insurance is one of the oldest insurance providers in the country. It currently offers a range of insurance products such as whole life insurance, endowment-based insurance protection, child plans, etc. Postal life insurance tax benefits are one of the key reasons why people buy PLI policies.

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What is Postal Life Insurance?

Postal Life Insurance (PLI) was founded in 1884 to offer life cover to the employees of the Postal Department. Later, all its plans were extended to employees working in different government or private sectors. PLI 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.

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What are the Postal Life Insurance Tax Benefits?

Policyholders can save a significant amount of their annual income using postal life insurance tax benefits. PLI tax benefits can be sought under the following sections of the Income Tax Act of India, 1961.

  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.

    *Note: Easily use the term insurance calculator and calculate the premium amount of your chosen term life insurance plan.

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

    As per the latest Union Budget, the Government of India has made the maturity benefits on postal life insurance tax benefits taxable if the average premiums paid in a year are more than 5 Lacs. Similarly, in ULIP plans, if the average premiums are more than 2.5 Lacs, the maturity benefits are taxable. This is applicable for policies purchased after 31st March 2023.

  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, 1961.

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What are the Tax Benefits under RPLI?

Postal Life Insurance now extends its life insurance policies to the country's rural population. 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 postal life insurance tax benefits under RPLI policies are the same as those of a regular life insurance policy. Policyholders can claim PLI tax benefit on the premiums paid and the benefits applicable under the following sections of the Income Tax Act of 1961:

  • Section 80C
  • Section 10(10D)
  • Section 80D

*Note: It is important to firstly know what is term insurance and then understand the Postal Life Insurance tax benefits.

FAQs

  • Q: What is Postal Life Insurance (PLI)?

    Ans: Postal Life Insurance (PLI) is the oldest life insurer in India, established in 1884 to provide life cover primarily to Postal Department employees. It has since expanded to cover employees from various sectors and the rural population through Rural Postal Life Insurance.
  • Q: How is PLI Maturity Benefit taxed under Section 10(10D)?

    Ans: Ans: To answer whether the PLI maturity amount is taxable, maturity benefits are taxable under Section 10(10D). For policies issued after April 1, 2023, the annual average premium should be less than 5 Lacs, or the maturity proceeds will be taxable. For policies with premiums under 5 Lacs, the maturity will be tax-free.
  • Q: Is PLI tax-free for Death Benefits?

    Ans: The death benefit received by nominees upon the death of the life assured is tax-free under the Income Tax Act.
  • Q: What tax benefits apply to Rural Postal Life Insurance (RPLI) policies?

    Ans: RPLI policies enjoy the same tax benefits as regular life insurance policies. Tax deductions can be claimed on premiums paid, and benefits are applicable under Section 80C, Section 10(10D), and Section 80D of the Income Tax Act.
  • Q: Is there any TDS on PLI Maturity proceeds?

    Ans: Yes, if the maturity proceeds exceed Rs. 1 Lakh, the insurance company will deduct a TDS of 1%.
  • Q: What tax benefits are available for PLI policies under Section 80C?

    Ans: Premiums paid towards PLI policies are eligible for tax deductions under Section 80C of the Income Tax Act. The maximum deduction allowed is Rs. 1.5 Lakhs. The benefit is applicable for policies issued on or before March 31, 2012 (20% of the sum assured) and after (10% of the sum assured).

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