By the way, the death benefit received by the nominee is completely tax free. But there are some cases in which there is a provision for levying tax. This happens when the policyholder puts certain conditions in the plan. Read on to know in detail….
In life insurance, it is necessary to give the name of the nominee. This is for when the policyholder is no longer in this world. After this, all the death benefits of the policy are given to the nominee. While taking line insurance, the policyholder has to give the name of the beneficiary nominee. This is the same nominee who will be given the benefit of death benefit. For this, wife/husband, child or parents can be made beneficiary nominee. You can also change this name. But whoever will enter the last name, only he will be given the facilities of death benefit. Here it has to be kept in mind that some rules of income tax work on the amount received by the nominee.
There are two major advantages of life insurance. First, it guarantees protection during life and after life. Whether the policyholder lives or not, his nominee or family is guaranteed financial security. The second benefit is the exemption in income tax. Many people take an insurance policy thinking that it will get the benefit of tax deduction. The benefit of tax exemption will be available on the premium of insurance and the amount received on maturity.
How much tax deduction do you get
Section 80C of Income Tax states that the amount deposited as premium in an insurance policy will be eligible for tax deduction. The maximum limit of tax deduction has been fixed at Rs 1.5 lakh. That is, if you pay premium up to Rs 1.5 lakh in a year, then no tax will be levied on it. There is a rule that if 10 percent of the sum assured of the policy is paid as premium, then 10 percent of the sum assured amount will also get tax exemption as tax.
No tax in this situation
Just as the benefit of tax exemption is available on premium payment, in the same way, the facility of tax exemption is also given on the death benefit received by the nominee. This facility is given under Section 10(10D) of Income Tax. When the nominee gets the sum assured money in the death benefit, then it is not kept in the category of income. In this case, the total amount received by the nominee is tax free. There is no limit on the maximum amount on which there is a rule to give tax exemption. Whatever money the nominee gets. Tax free rule is applicable on it.
when is tax due
Many times it happens that the policyholder writes in his paper that after his death, the benefit of death benefit should not be given to the nominee immediately. Due to this, the death benefit money gets deposited with the life insurance companies for a few months or even years. When the interest payment period is over, the insurance companies give the death benefit money to the nominee. Under this, along with the sum assured, interest money is also available. In this, there is no tax on Sum Assured, but interest is taxed. Sometimes the nominee has to pay money in the form of inheritance and estate tax. This happens when the policyholder leaves the world without making anyone the nominee of his property in his paper.
