Firstly, insurance policies! Says noted tax analyst 
Manindra Tiwari (Partner, Tiwari & Mishra Chartered Accountants), “The returns offered by insurance policies are closely linked to the premiums paid and so are the tax benefits.” Clearly, these products are designed to meet a wide variety of needs ranging from savings to profits. All that an investor needs to do is to pick and choose the ones that best suit his/her profile. But analysts are of the opinion that the attractive tax benefits of these products should be seen merely as perks offered by the insurance policy. Yet, those are primarily the tax benefits which continue to be major crowd pullers for these schemes.
Insurance policies can be broadly categorized as pure risk cover, return oriented cover and pension plans. Pure risk cover is meant for those who primarily need only a risk cover. The policy holder makes premium payments during the term and chooses the lump sum amount payable to nominees in case of the policy holder’s death. No benefits are payable on survival at the end of policy term. Whereas insurance policies, which combine both returns and risk covers e.g. endowment and money-back policies, qualify as return oriented cover. Endowment policies involve payments of a lump-sum amount either on death or on maturity. The lump-sum is the basic sum assured plus bonus additions. Money-back policies are similar to endowment policies; however, they differ as far as the outflows are concerned. A part of the sum assured is paid to the policy holder before maturity.
Now to pension plans; which are basically tools for retirement planning. Policyholders make contributions over a period of time (or even a one-time contribution) to form a corpus. This corpus is used to generate regular income for policy holders from the retirement age. The pension plans are flexible, whereby income can be received either for a fixed tenure or till death. In the majority of cases, investors avail of tax rebates under section 88 in the range of 15 % to 30% of the premium paid during the year depending on the total income. Tax benefits are also offered when medical riders are added to the policy as per section 80 D.
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Source : IIPM Editorial, 2008
Manindra Tiwari (Partner, Tiwari & Mishra Chartered Accountants), “The returns offered by insurance policies are closely linked to the premiums paid and so are the tax benefits.” Clearly, these products are designed to meet a wide variety of needs ranging from savings to profits. All that an investor needs to do is to pick and choose the ones that best suit his/her profile. But analysts are of the opinion that the attractive tax benefits of these products should be seen merely as perks offered by the insurance policy. Yet, those are primarily the tax benefits which continue to be major crowd pullers for these schemes.Insurance policies can be broadly categorized as pure risk cover, return oriented cover and pension plans. Pure risk cover is meant for those who primarily need only a risk cover. The policy holder makes premium payments during the term and chooses the lump sum amount payable to nominees in case of the policy holder’s death. No benefits are payable on survival at the end of policy term. Whereas insurance policies, which combine both returns and risk covers e.g. endowment and money-back policies, qualify as return oriented cover. Endowment policies involve payments of a lump-sum amount either on death or on maturity. The lump-sum is the basic sum assured plus bonus additions. Money-back policies are similar to endowment policies; however, they differ as far as the outflows are concerned. A part of the sum assured is paid to the policy holder before maturity.
Now to pension plans; which are basically tools for retirement planning. Policyholders make contributions over a period of time (or even a one-time contribution) to form a corpus. This corpus is used to generate regular income for policy holders from the retirement age. The pension plans are flexible, whereby income can be received either for a fixed tenure or till death. In the majority of cases, investors avail of tax rebates under section 88 in the range of 15 % to 30% of the premium paid during the year depending on the total income. Tax benefits are also offered when medical riders are added to the policy as per section 80 D.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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