Almost all the people of India maintain life insurance policies. After all, it is such security which provides support during sudden deaths or accidents. While you are ensuring for life insurance, you should know about the tax benefits advantages of your life insurance policies. Life insurance policies are a great source to save tax. Here are the advantages below;
The first most advantageous benefit of life insurance when it comes to the saving of tax is the income tax benefit. By income tax benefits, we mean Death benefits, policy cash values, tax-free exchanges, etc. If you are holding life insurance, then just be relaxed about the tax issues. Your money keeps on growing, which is free of tax. Besides, the beneficiaries attached to the life insurance policyholder will also get full assistance without the deduction of tax. You can even replace your existing policy, which is tax-free. Income tax benefits are mentioned in IRC Section 101(a), IRC Section 72, IRC section 1035, and IRC Sections 7702.
Another advantage of tax benefit related to life insurance is the Transfer Tax Benefit. A policyholder may anytime get transferred or relocated from one place to another. In such case, if the insurance belongs to a certain place and the owner relocates anywhere else, then also the full assistance is provided to the owner without any deduction of taxes. If somehow, the policyholder passes away staying in another place, his or her beneficiaries will get the full amount without any tax deduction. These are mentioned in IRC Section 2056 and RC Sections 2042.
The policyholder keeps on paying premiums every span of time. This type of amounts is also tax-free. These are called gift taxes, which can be exempted.