Under this, the rule of policy surrender has been changed and now policyholders will be able to surrender the policy easily as well as get more refund. The new rules of insurance regulator IRDAI have come into effect from October 1, 2024. Let us know what will be the benefit to the policyholders from this change in the rules?

Guaranteed surrender value in the first year

IRDAI’s new rules have been implemented from the first date i.e. today. If we talk about the benefits to policyholders, if you surrender your policy in the first year, then now you will not have to lose the entire life insurance premium deposited by you. Rather, under the new rule, the Insurance Regulatory and Development Authority of India (IRDAI) has now made it clear that policyholders will get guaranteed surrender value from the first year itself, even if the policyholder has paid only one annual premium.

Earlier the deadline was fixed for two years.

The latest change made by the insurance regulator is a relief, because earlier the policyholder used to get this facility from the second year. This means that after buying the insurance policy, he used to get the facility to surrender his policy (Insurance Policy Surrender Rule) only after paying the premium for at least two full years, whereas under the old guidelines there was no provision for giving any surrender value in the first year.

What does it mean to surrender a policy?

Before understanding this rule, it is very important to know the meaning of insurance policy surrender. Actually, surrendering a policy means that the policyholder does not want to run it till maturity and wants to exit this policy by closing it earlier. When this happens, the policyholder is given a payment called surrender value or early exit payout, the value of which is the higher of the Guaranteed Surrender Value (GSV) or Special Surrender Value (SSV). The interest rate used in the calculation cannot be more than the current yield on 10-year Government Securities (G-Secs) plus an additional 50 basis points.

How much refund on insurance of 5 lakhs?

For example, consider a life insurance policy with a maturity period of 10 years, whose sum assured is Rs 1 lakh. So the annual premium for this is Rs 10,000, while the bonus is Rs 50,000. If we calculate it according to the rules implemented from October 1, then the present value of the paid insurance amount and future bonus will be Rs 7,823 or 78%.

If we look at a 10-year policy with a sum assured of Rs 5 lakh, the policyholder will pay a premium of Rs 50,000 in the first year. Under the new rule, if he plans to leave the policy after one year, then he will now get a refund. If the premium has been paid for a full year, then based on the calculation, the policyholder will get Rs 31,295 back. If we talk about the formula used for this, then…

Impact on returns on policy

According to the report, this rule implemented by IRDAI may result in less profit for investors holding life insurance policies in long term investments. Actually, increase in surrender value may increase the cost for life insurance companies and it is likely that those holding policies for a long time may get less returns than before. Returns on non PAR policies may decrease by 0.3-0.5 percent, while bonus payments in PAR policies may decrease.

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However, most taxpayers make use of Section 80C of the Income Tax Act for tax-savings. Under this, there are about a dozen such options, in which tax-savings can be done by investing. These include PPF, NPS, ELSS, Life Insurance Policies etc. But, we are telling you about such ways to save tax, which do not require any kind of investment to take advantage of them.

Tuition fees

Individual taxpayers can claim deduction on tuition fees under section 80C of the Income Tax Act. This facility is not available to HUF. You can claim this deduction on the tuition fees of two children. Tuition fee refers to the total tuition fee to be paid in a financial year.

If you do a job, you have to submit the investment proof to the finance department of your company by the first or second week of January every year. You can take the Tuition Fee Payment Certificate from the school and give it at your office. This will result in good tax-savings for you.

Education scholarship

The scholarship amount received for education is exempt from tax under section 10(16) of the Income Tax Act. Tax experts say that the scholarship received from the government or any trust is exempt from tax.

Contribution to Political Party/Charitable Organizations

If you make any kind of contribution to any political party or charitable organization, then you can claim tax deduction on it. This deduction facility is available under section 80GGC of the Income Tax Act.

Education loan

If a student has taken an education loan, then a deduction can be claimed on the interest amount. This deduction can be claimed under section 80E of Income Tax. You just have to keep in mind that this deduction is available only on the interest part of the EMI. Deduction cannot be claimed on principal.

Rent paid

If you are employed and do not get House Rent Allowance (HRA), you can claim a deduction on the rent you pay. This deduction is available under section 80GG of the Income Tax Act. Self-employed individuals can also claim this deduction. To take advantage of this deduction, it is necessary to submit Form

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