GRP Have Triple Taxation Benefits

It is true that there are many stock market investment schemes available in the market, which people can opt for. However, investing in the stock market is risky in terms of the amount you could lose in one day. There are thousands of stories out there of people who have made it big in the stock market and that excites most individuals to take the risk. I do not want to discourage you from making investments in the stock market but I would want you to take a look at some other options as well so that you are covered against all the spectrums.

One such option is GRP or Guaranteed Returns Plan. Apart from payouts this policy also provides triple taxation benefits. This blog will provide a guide on the taxation benefits of Guaranteed Returns Plans.

Also Read: Why Should You Invest in a Guaranteed Return Plan?

What is a Guaranteed Returns Plan?

Guaranteed Returns Insurance Plans are financial firms’ non-participating monthly income programs. The insured will pay an annual premium for the duration of the policy. The duration will be determined by the insurance firm based on their age as well as financial status. When the insurance reaches maturity, the insured will begin receiving guaranteed payments which is comparable to the insured individual’s monthly salary.

The payment value is determined by the insurance coverage selected by the insured, the premium value paid, and the sum promised on the policy. As a result, the plan term encompasses both the time during which the insured needs to pay the premium amount and the timeframe during which the insured receives the payment.

A monthly income choice is among the finest methods to stay one step forward in your spending and meet the monetary demands of you as well as your family members. By giving a sensible value income, the guaranteed income scheme offers people stability, ensuring that their level of life does not alter even after they are retired.

Triple Taxation Benefits of Guaranteed Returns Plans

Guaranteed-return policies benefit from triple taxation as EEE, exempt, exempt and exempt. The sum invested, accruals (the sum that accumulates), and maturity value are all tax-free. Other similar instruments, such as bank fixed deposits, on the other hand, lack such advantages.

The premium paid for the Guaranteed Returns Plans is tax-free under section 80C for premium paid upto INR 1.5 lakhs a year, provided the sum assured is a minimum of 10 times the annualised premium paid.

The maturity amount of Guaranteed Returns Plans is entirely tax-free under section 10(10D) provided the sum assured is more than 10 times the annualised premium in all the years, and the money is invested for a minimum period of 5 years!

Any death benefit paid out to the nominee, if any, is also completely tax-free in the hands of the nominee. Also, the interest earned in Guaranteed Returns Plans along with bonuses, are also tax-free. This is the triple taxation benefit of Guaranteed Returns Plans in India.

For example, Mr. Sen, who earns 20,00,000 INR per year, (30% tax bracket) decides to purchase a current guaranteed-return policy by depositing 10,00,000 INR in a single payment. He will save 46,800 INR in taxes as a result of this. Furthermore, upon maturity, Mr. Sen would get 40,40,000 INR which would be tax-free.

Mr. Sen would’ve had to file a tax return on the maturity value if he had placed the same sum in a bank Fixed Deposit, even if his invested money would have been free from taxation. Mr. Sen would have to pay 9,11,000 INR in taxes on the maturity value because he is in the 30% income tax band.

Mr. Sen will save a gross amount of 9,58,000 INR by purchasing the policy. Guaranteed-return programs have IRRs (internal rate of return) usually ranges from 5.3% to 5.8 %.

What are the other benefits of Guaranteed Returns Plans?

Following are the additional benefits of Guaranteed Returns Plans apart from taxation:

1. Guaranteed Income: A guaranteed income plan gives the policyholder a regular pay each month. This is not dependent on market fluctuations.

2. Assured Coverage: The guaranteed income plan offers a sense of financial security to the policyholder and his family. Based on the norms, if the policyholder passes away during the plan’s tenure of the income plan, a certain percentage of monthly income is offset to a named beneficiary.

3. Immediate Monthly Payouts: The insured will begin receiving reimbursements immediately after the premium installments are completed. When the plan’s term expires, the insured will start receiving the sum insured in monthly installments.

4. Flexible Options of Payout: These policies may be highly advantageous when a person needs a substantial amount in an emergency. The insured has the option of receiving the payoff once the policy matures as a single amount. Alternatively, they may choose to receive it as a monthly salary.

Also Read: Best Fixed-income Investment Options with Guaranteed Returns

Who is required to purchase Guaranteed Insurance Plans?

These policies are suited for risk-averse individuals who want guaranteed profits from a program. These policies are available to anybody between the ages of 18 and 60.

A guaranteed return policy allows the insured to be certain in their monetary security during their retirement age. These policies will give insurers guaranteed returns, allowing them to deal with various adversities while maintaining a consistent stream of income.

Conclusion

A Guaranteed Insurance plan offers you the opportunity to generate a stable income. These plans are specially designed for those who are nearing retirement age and are looking for a guaranteed return on their savings.

A Coordinated Guaranteed Returns Investment Plan can help you better manage your finances and address your retirement income needs. They provide predictable returns during retirement years as you face different adversities such as health care costs or other unexpected expenses.

Jan 10, 2022
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Gayatri Prabhu, Head-Digital Business at Mahindra Insurance Brokers Limited (MIBL) is one those few digital leaders who has the width and depth that is required to execute an ROI driven holistic digital strategy. She cuts through the noise, identifies the critical levers and leads her team to successful execution of the defined strategy. Her core mantra to win new and retain existing customers is: understand the consumer behavior and craft experiences around it.

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