Extra Income Plan For Financial Growth

An extra source of income is everyone's dream come true, isn't it? But do you know what is even better? An extra source of income that also gives you insurance protection, of course! But, wait. Is there such an option available? The short answer is 'yes.'

And it's called an additional income plan. Like every other life insurance plan, an additional income plan gives you a life cover. But it goes one step further and also gives you the option to choose income benefits. Some plans pay out income on a monthly basis, while others pay out income annually. Some plans may also offer these options under the same policy. So, if additional income is what you want, there are many options to choose from.

But first, how does an additional income plan work? Let's take a look at that.

Additional income plans are designed to give you exactly what they promise - additional income. Generally, additional income plans give you limited premium payment terms to choose from. And if you survive that term, the plan will pay your income regularly thereafter, for a specified period. The income paid out is generally calculated as a percentage of the annual premium you paid.

So, to put it simply, you first pay premiums for a limited period. And then, after that period, you will receive payouts from the plan. This will act as a reliable source of additional income for you.

As usual, let's take an example to understand this better.

1. Suppose that you are 25 years of age. And you've purchased an income plan that offers you a life cover of Rs. 1 crore.

2. You choose an option where you need to pay a premium of Rs. 50,000 per year, for 8 years only.

3. And then, the income plan will pay you 53% of the annual premium each year from the 9th year onwards, for 30 years.

Now, after 8 years, you will be 33 years, isn't it? That is when your premium payment term will come to an end. And from there onwards, for 30 years, you will receive Rs. 26,500 annually. This will continue till you are 63 years of age.

So, that is the summary of how a basic income plan works. Of course, there may be differences based on the details from one insurer to another. Now, here's a closer look at some of the ways in which an additional income plan can help you.

The most common way in which an additional income plan benefits you is the extra income it offers. As you've seen in the example above, it can be a reliable source of extra income in addition to your primary income, which may be salary or business income. So, you can make use of these additional funds to fulfill any small or big goals that you may have.

For example, if an income plan offers you a monthly payout of Rs. 5,000, you could use that extra money in so many ways. You could surprise your family with a quick weekend getaway, you could purchase a premium gadget that you've been wanting to buy, or you use it to fulfill other such short-term goals.

As the name itself suggests, an additional income plan is designed to give you an extra stream of income. This will be over and above your primary income source. Depending on the type of plan you choose, this additional income can either be in the form of a lump sum amount or as periodical income. That's not all. With certain income plans, you also get the flexibility to choose the income payout frequency, the premium payment tenure, and the income payout term.

This allows you to customize the income plan according to your financial needs and requirements. The extra income that such a plan offers - you can reinvest it and satisfy your financial goals in the long run.

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According to Section 80C of the Income Tax Act 1961, the premiums that you pay every year towards a life insurance plan can be claimed as deductions. This tax benefit1 is valid up to Rs. 1.5 lakh. With this, you can reduce your total taxable income. This can, in turn, help you lower your tax liability.

Here's an example. Let's say that your total taxable income comes up to Rs. 6 lakh. And suppose that you've opted for the old regime of taxation. You would then be required to pay tax at the rate of 20%. Now, say you've paid a total annual life insurance premium of Rs. 1.5 lakh for your income plan. You can deduct the same from your total taxable income.

So, your new taxable income would be just Rs. 4.5 lakh (Rs. 6 lakh - Rs. 1.5 lakh). And you would now be required to pay tax on that amount only, instead of the whole Rs. 6 lakh. That's not all. The maturity benefits that you receive upon survival and the death benefit that the beneficiaries would receive are also exempt from taxation under section 10(10D)⁴ of the act.

As you can see from the above, an income plan is one of the best investment options that you can choose right now for setting up a comfortable life. With the extra corpus that you accumulate through the plan, you get a chance to satisfy all of your and your family's wants and needs. If you're looking for a good income plan that also gives you an adequate life cover, you can check out plans like the ABSLI Assured Income Plus Plan, the ABSLI Income Assured Plan and the ABSLI Monthly Income Plan.