Think beyond 80C: How insurance can help optimise your tax liabilities while opting old tax regime

As FY 2024-2025 is nearing an end, it’s important for the policyholders to understand and explore different ways to optimise their tax liabilities beyond section 80C of the Income Tax Act when opting old tax regime. While most taxpayers are aware of the tax benefits associated with section 80C, many of them might have still not explored the several other sections that could have significantly reduced the tax outgo.

In this piece, we explore some of such tax-saving opportunities in detail.

Section 80D

Under this section, the policyholder can claim deductions while filing the investments for the premiums paid towards the health insurance plans for themselves, spouse, parents and children. However, the deduction amount differs for self, spouse and children (go up to Rs 25,000), parents (below the age of 60 years), and senior citizens (60 years or above the age of 60 years – could go up to Rs 50,000).

Rakesh Goyal, Director at Probus, said, "Senior citizens are generally eligible for higher deductions as compared to the younger ones under this section. In this case, if Rohit (a 32-year-old IT professional) opts for a health plan for himself, his spouse and his senior citizen parents, he can make a total claim worth Rs 75,000 under this section. In addition to this, deduction claims can be made up to a specific amount spent on preventive health checkups. Section 80D is considered to be one of the most effective options beyond 80C to optimize one’s tax liabilities."

Section 80CCC

Premiums paid towards certain pension plans or life insurance plans which includes annuity payments can be claimed up to Rs 1.5 lakhs for tax exemptions under this section.

Section 10(10D)

This section comes with tax-free maturity benefits wherein if the policyholder receives any payout from his/her life insurance policy comes out to be completely tax-free. This also includes the bonuses part. However, the annual premium must not exceed a certain 10% of the sum assured for policies that were issued after 1 April 2012.

Section 80CCD (1B)

Besides the tax deduction of Rs 1.5 lakhs under section 80C, the policyholder can claim an additional Rs 50,000 under this section by contributing to the National Pension Scheme (also known as NPS). "This means that the policyholder can collectively reduce the taxable income up to Rs 2 lakh annually. This is a go-to option for taxpayers who have already exhausted their 80C limit. Also, since NPS is regulated by the government it becomes one of the safest options for the ones who look for security in their investment portfolio," said Goyal.

Conclusion

The bottom line is tax planning is all about getting the maximum benefit out of it and hence it is imperative to explore options beyond 80C. With smart decisions, one can bring down their tax liability drastically while also securing their future. Review your insurance portfolio today and see to it that you make the most of the above tax-saving options before FY 2025.