Life Insurance Investment and Taxation

Life insurance is not only a safety net for your loved ones but also a potential investment tool. At Alfa Associates, policies like Endowment Plans, ULIPs (Unit-Linked Insurance Plans), Whole Life Insurance, and Money-Back Policies combine life coverage with investment components. These plans offer different levels of protection and returns, with ULIPs being the most market-linked and flexible.

Taxation on life insurance is beneficial. Under Section 80C of the Income Tax Act (India), premiums paid for life insurance policies are eligible for deductions up to ₹1.5 lakh per annum. The death benefit is fully tax-free under Section 10(10D), while maturity benefits are tax-exempt if the premium is ≤10% of the sum assured.

However, ULIPs are subject to capital gains tax, with short-term capital gains (STCG) taxed at 15% and long-term capital gains (LTCG) taxed at 10% (for gains exceeding ₹1 lakh) if the premium paid is more than 2.5 lakhs.

Life insurance also offers dual benefits: protection and wealth accumulation. While returns are comprehensive, it provides consistent growth, tax benefits, and a safety net. Carefully evaluate premiums, policy types, and charges to ensure the right fit for your financial goals.