Life insurance is a contract between the insurer and insured under which the insurer offers certain amount of money called sum assured at death or maturity to the beneficiary.
What is SBI Life Insurance ?
Life Insurance is a contract where, in exchange for either a premium paid periodically or as an immediate lump-sum, the policyholder receives protection against death due to natural causes (and some man made ones) during the term of the policy. If you die within that period (i.e., end of policy term), then you’r dependents (or nominee) receive life insurance payout. Some policies require you to be medically fit at inception and throughout; however this can vary from one company to another. Death caused due to accidental reasons may not be covered by all companies and SBI Life Insurance.
What is the importance of SBI Life Insurance?
Life Insurance is important because it helps you provide financial security to your loved ones. It provides monetary support to them in case of an unfortunate event; or, can be used by them for various other purposes like education expenses, purchase of home, marriage etc. SBI Life Insurance also provides you with peace-of-mind knowing that if anything untoward happens to you, your family will not be left high and dry without resources to meet their daily needs or liabilities that may come up; moreover, premiums are fixed at the commencement of the policy term (i.e., throughout the tenure), which means any increase in future is less likely (though this varies from company to company). Further, Life Insurance is also a very good saving tool for you because it helps save tax.
Tax benefits of life insurance SBI Insurance India
1)Premium paid on term SBI Life Insurance plans is eligible for deduction under section 80C up to Rs 1 lakh (though if the premium payable in one year exceeds Rs 1 lakh, then benefit will be restricted to Rs 1 lakh). This deduction can be availed not only by the policyholder, but also by their spouse and children (including wards).
2) SBI Life Insurance proceeds received upon death of the Life Insured are income tax free .As per Section 10(10D), an individual will not have any taxable income on ” Sum Assured” received at the time of maturity or surrender /death. Further, as per Section 10(10AA), any payment made by an insurer to the legal heir of the insured, upon his death would be completely tax exempt.
3) SBI Life Insurance proceeds received upon survival beyond 5 years from the date of policy inception are also income tax free .The premiums paid for such policies could not be claimed as deduction u/s 80C or u/s 80CCC since these were treated as capital expense rather than an expense incurred in earning income. However, this has now been changed and premiums can now be claimed as a deduction u/s Section 80CCD (1B).
4) Under section 15C & 15CA, insurance companies are allowed to set-off profits against past losses. Such set off is only available for 3 years, which means that any profits earned by the insurer can be used to setoff past losses of 3 preceding years. For instance, suppose an insurance company has made a loss of Rs 1 crore in year 2009-10 and consequently does not have enough capital for meeting its statutory requirement (which is at least 15% of its investment). If this insurance company makes a profit of Rs 5 crore in year 2010-11 and Rs 10 crore in 2011-12 (i.e., 2 consecutive profitable years), it will be allowed to set off its previous profits against the capital held as on March 31, 2013 making it easier for such companies to meet their statutory requirements
5) To attract more customers Life Insurance companies now offer various riders like accidental death insurance, critical illness cover etc. However the tax-treatment of such riders would depend on their nature/objective (like whether these are for protection or profit).
6) SBI Life Insurance is allowed to borrow money at concessional rates of interest u/s Section 11BA; they can also transfer funds /assets across group companies without paying any taxes u/s Section 11BB
7) SBI Life Insurance have not claimed deduction under Section 10(10D), can claim deduction on “other income” by investing it in eligible instruments like infrastructure bonds
8 ) If an insurer makes payment due to mis-selling then he will be allowed to set off that expenditure against his taxable income . expenditure is treated as revenue expenditure and can be set off against any income in the year or carried forward for 7 years.
9) Life Insurance policy taken out by LIC and General Insurance companies (to cover risk of damage to fixed assets) is eligible for deduction under section 35AD
10) The Dividend Distribution Tax on Mutual Funds is eliminated subject to fulfillment of certain conditions under SBI Life Insurance.