New Tax Regime Brings These Changes To Your Insurance Tax
As the financial year draws to a close and the time to renew insurance premiums and consider new policies approaches, it's essential to understand the implications of the new tax regime. The recent changes introduced in the Union Budget 2025 offer several opportunities for tax savings and financial planning.
"The changes in tax slabs have been rationalised with an aim to boost household consumption, savings, and investment," said Chetan Vasudeva, senior vice president of business development at Elephant.in.
The key change that is set to impact tax payers is the increase in the personal tax exemption limit. Individuals with an income of up to Rs 12 lakh are now exempt from direct taxes, due to an increased rebate of Rs 75,000. However, this exemption applies only under the new tax regime, Vasudeva said.
Depending on their income and chosen tax regime, consumers can receive tax exemptions through insurance. Under the Income Tax Act of 1961, premiums paid for life or term insurance are eligible for tax deductions under Section 80C, Vasudeva explained.
These exemptions also apply to premiums paid for a spouse or child. Additionally, payouts or proceeds from insurance policies can be excluded from total income under Section 10(10D) of the Act, offering further tax benefits, particularly under the older tax regime.
As per Vasudeva, in the old tax regime, premiums paid on health insurance policies qualify for deductions under Section 80D. This includes premiums for self, spouse, dependent parents, in-laws, and children, with a deduction limit of Rs 25,000 per financial year. If any family member is a senior citizen, this amount increases to Rs 50,000. For taxpayers and their senior citizen parents, the total deduction can reach up to Rs 1 lakh annually. Preventive health check-up expenses are also deductible up to Rs 5,000, provided payments are made through non-cash modes.
Beyond insurance, tax benefits are available for the National Pension System, five-year tax-saving fixed deposits under Section 80C, and through home loans, education loans, and donations.
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