What is your opinion in linking insurance buying to Income tax sops? Discuss the tax benefits available to an individual for life insurance policies.

A policyholder who takes a Life Insurance Policy is entitled to the following income tax benefits. Section 80C of the Income-tax Act, 1961 Under section 80C of the Income-tax Act, 1961, any premiums paid for Life Insurance Policy on the life of the person, his/her spouse or children is eligible for a deduction from the Gross Total income of the person. The deduction is subject to the following conditions: The premiums paid in any year by the policyholder are allowed as a deduction up to a maximum amount not exceeding 10% (15% in case of certain persons with specified illness of ailments) of the Actual Capital Sum Assured under the Policy. Any amount in excess of the said 10%/15% will not qualify for deduction. This deduction is not applicable to deferred annuity policies. Actual Capital Sum. Assured is the amount guaranteed to be paid by the Life Insurance Company on the happening of the events insured under the policy. However, such Actual Capital Sum Assured shall not include premiums agreed to be returned and Bonuses declared from time to time. If the policy holder (other than annuity policy) discontinues the Policy within two policy years, no benefit is available in the second policy year. Besides the deduction given in the first policy year will be treated as an income in the second policy year. Deduction is allowed for the policies taken on the life of an individual, his wife/ husband and children. Life Insurance Policies including deferred annuity policies are eligible. Pension policies are treated separately under section 80CCC of the Income-tax Act, 1961 hence not eligible undersection 80C of the Income-tax Act, 1961. Under section 80C of the Income-tax Act, 1961, many tax saving instruments are eligible for deduction and Life Insurance Policies is one amongst them. The maximum amount which can be claimed as a deduction under section 80C, 80CCC (deduction for pension policies) and 80CCD of the Income-tax Act, 1961 (contributions under the New Pension Scheme) cannot exceed ₹1,50,000/-. Section 80 CCC of the Income-tax Act, 1961 Under section 80CCC of the Income-tax Act, 1961, the premiums paid for a pension policy issued by a Life Insurance company is eligible for deduction. Any amount received under a Pension Policy on account of surrender of the Policy or as pension (annuity payments) is taxable on receipt. The limit is ₹1,50,000/- which is subject to overall limit of deduction under all the three sections 80C, 80CCC and 80CCD of the Income-tax Act, 1961 all put together. Section 80CCD of the Income-tax Act, 1961 Central Government has notified contributions made under the New Pension Scheme administered by the Pension Funds Regulatory and Development Authority (PFRDA) as eligible for deduction under section 80CCD of the Income-tax Act, 1961. PFRDA collects contribution from subscribers and invests them as per fund options with some limited flexibilities, which can be selected by the Subscribers. PFRDA invests the funds of the subscribers like a Mutual Fund and manages them. Private Sector as well as self employed persons can join the New Pension Scheme and subscribe to the Scheme. Upon attaining the age of Superannuation at least 40% of the corpus must be utilized to purchase an annuity Policy from empaneled Life Insurance Company, who will then pay monthly annuity to the subscriber depending on the annuity option chosen. Up to 60 Years of the corpus can be withdrawn as commuted value at the time of superannuation. While the basic contribution under section 80CCD (I) of the Income-tax Act, 1961 is subject to the overall deduction under section 80C, 80CCC and 80CCD of the Income-tax Act, 1961 put together, Section 80CCD (1B) of the Income-tax Act, 1961, provides additional ₹50,000/-deduction only for the contributions to the Pension scheme notified under the section by the Central Government i.e. PFRDA's New Pension Scheme The amount of contribution from employee is limited to 10% of salary. Section 80DDD of the Income-tax Act, 1961 A Life Insurance Policy taken by an individual who has a dependent with some specified disabilities under the Section will be eligible for deduction up to ₹75,000 per year for taking the Life Insurance Policy for such dependents. The deduction increased to ₹1,25,000 per year where such dependents have serious disabilities. Such policies are taken by the Caretaker of such dependent (who must be a relative having insurable interest) on his own life and the dependent shall be the nominee who will get the benefits under the Policy. Upon the death of the caretaker. If the dependent predeceases the Caretaker, the amount allowed as deduction shall be deemed to be an income in the year in which such amount is received by caretaker and shall be taxed accordingly Section 10(10D) of the Income-tax Act, 1961 In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than- any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA of the Income-tax Act, 1961; or any sum received under a Keyman insurance policy; or any sum received under an insurance policy issued on or after the 1st day of April, 2003 but on or before the 31st day of March, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured; or any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured: Provided that the provisions of sub-clauses (c) and (d) shall not apply to any sum received on the death of a person: Provided further that for the purpose of calculating the actual capital sum assured under sub-clause (c), effect shall be given to the Explanation to sub-section (3) of section 80C of the Income-tax Act, 1961 or the Explanation to sub-section (2A) of section 88 of the Income-tax Act, 1961, as the case may be: Provided also that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is- a person with disability or a person with severe disability as referred to in section 80U of the Income-tax Act, 1961; or suffering from disease or ailment as specified in the rules made under section 80DDB of the Income-tax Act, 1961, the provisions of this sub-clause shall have effect as if for the words "ten per cent", the words "fifteen per cent" had been substituted.