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Bharti AXA Life’s Online Tax Saving Offer: Single Premium Insurance Plan

Invest Once is a one-time premium plan, comes with tax benefits but watch tax implication before your invest

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With the tax savings season approaching, institutions are firming their product portfolio to offer novel products to choose from. Bharti AXA Life Insurance has recently introduced Bharti AXA Life Invest Once, a unique single premium traditional plan. Importantly, even though it’s a traditional plan, it will be available on the company’s website for anyone to invest in it.

The idea seems to catch the online investor population especially young investors who are more familiar with online experience. Invest Once appears to be a first-of-its-kind, online, Single Premium, traditional plan with inbuilt guarantees.

Here are the basic features:
• Minimum age at entry (age last birthday) - 8 years for 10 years term ; 13 years for 5 years term
• Maximum age at entry (age last birthday) - 55 years
• Maximum Maturity Age (age last birthday) - 60 years for 5 years term ; 65 years for 10 years term
• Minimum Annual Base Premium (Excluding applicable taxes and premium for enhanced death cover) - Rs 5,000
• Maximum Annual Base Premium (Excluding applicable taxes and premium for enhanced death cover) - No limit
• Policy Term - 5 years & 10 years
• Premium Payment Term - Single Premium

The plan being an insurance plan comes with tax benefits under section 80C of the Income Tax Act, 1961 and requires a one-time premium payment to be made for a 5 or 10 year tenure. The Single Premium (excluding service tax and applicable cess) will depend on the age, gender and policy term chosen.

Is maturity tax-free?: From tax point of view, the amount of sum assured (life cover) in a life insurance policy is important. Unless sum assured is ten times of premium, the proceeds will not be tax-free. Therefore, keep sum assured at least ten times of premium in this policy. This will be possible by opting for ‘Enhanced Death Cover’ feature of the scheme. Under it, other than the Sum Assured chosen, if you wish to increase the Life Cover under the policy, you can avail the same by paying an additional premium known as the Mortality Premium.

The death benefit in Invest Once therefore would be the Enhanced Death Cover i.e. ten times of premium. The maturity value will the premium paid plus the guaranteed additions. Guaranteed Additions are calculated as a percentage of the single premium and will be added every year till the end of the policy term. The guaranteed additions will be 7 per cent for the 5 year term and 9 per cent for the 10 year term.

End note: The returns would be in the range of 5-7 per cent without Enhanced Death Cover. But without choosing Enhanced Death Cover feature, the proceeds would be taxable. Ask the insurer for Illustration Benefit and see the internal rate of return on your age, term, premium before investing. Once invested, surrendering it before maturity would prove costly. The close competitor could be 5-year tax saving FD (read here) as both are debt assets.