Benefits of Endowment Policy

Benefit under Endowment Policy:

Under a special provision in the Income tax Act, the returns on an insurance policy are tax free. There will be two possibilities, if the policy is other than a term policy.

• untimely death of the insured:In this situation, a benefit can be received on the death of the person insured under the policy. This receipt is tax free in the hands of the dependants who actually receive the insurance benefit. This means that under Section 10 (10D) of the Income Tax Act the amount received on death from an insurance policy will not be included in the taxable income calculations.
• On maturity: In this case, the amount would be received at maturity of the policy. It would include bonus and other benefits. This happens when the policyholder actually lives through the entire policy period, for example, in money back policies or endowment policies. In this case too the receipt is completely taxfree in the hands of the investor.