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Tax Benefits Of Term Insurance Plan

A variety of deductions and exemptions are available under the various parts of the ITA to help you save money on taxes (Income Tax Act). Investing in a wide range of instruments that qualify for these deductions and exemptions is available to taxpayers. Term insurance is one such tax-saving tool. Aside from the tax benefits of term insurance, policyholders also receive solid life insurance coverage for their family and can live a stress-free life in the long run.

Tax Benefits Offered Under Term Insurance Plans

Tax Benefit under section 80C Premiums paid are eligible for tax deduction up to Rs. 1.5 lakh
Tax Benefit under section 10(10D) Nominee is eligible to get tax benefit on the death benefit provided in case of policyholder's death
Tax benefit under section 80D Deduction up to Rs. 25,000 is available under section 80D on premiums paid for term plans with critical illness cover option
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1. Premium has been calculated for coverage till 60 years
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What Is Term Insurance?

The most basic type of life insurance policy, term insurance, provides life protection to an individual for a certain period of time in return for regular premium payments. If the life insured dies during the policy period, the policy nominee will receive a death benefit as defined in the policy including terms.

Individuals looking to save money on taxes would definitely benefit from term insurance plans. According to the Income Tax Act of 1961, any term insurance policyholder is eligible for tax benefits. Term insurance policies often provide customers with tax deductions under Section 80C of the Income Tax Act of 1961, as well as further deductions up to Rs 1.5 lakhs. Policyholders can also seek exemptions under Section 10(10)D if they receive any amount as part of maturity benefits from their insurance policy.

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Tax Benefits Of Term Insurance Plan

When you buy a term plan, you can take advantage of a number of term insurance tax benefits.Learn about the tax benefits that come with buying a term life insurance policy. The tax benefits for the premium paid as well as the tax benefits from the death benefit of term life insurance policies are listed below.

Section 80C

Section 80C of the Income Tax Act of 1961 covers the most basic and fundamental term insurance tax benefit available to any Indian taxpayer. Many people believe this section to be the most popular tax-saving tool.

Term insurance tax benefits of up to Rs. 1.5 lakh are available under this section for premiums paid to buy the plans. It is important to note that the maximum limit of tax deductions available under this Section includes tax benefits on PPF (Public Provident Fund) investments, tax-saving Fixed Deposits, and a range of other tax-saving products.

By buying a comprehensive life insurance policy for yourself, you may maximise the tax benefits of term life insurance and benefit your family members in the long run.

Key Facts About Term Insurance Tax Benefits Under Section 80C

  • The maximum amount that can be claimed under Section 80C each year is Rs. 1.5 lakhs, and this covers other qualifying investments as well.
  • The term insurance benefits in income tax are applicable for term insurance plans issued before March 31, 2012, if the annual premium is less than 20% of the sum assured.
  • The annual premiums of the term insurance plan cannot exceed 10 % of the specified sum assured. Term insurance tax benefits under Section 80C will be applied proportionately if it surpasses otherwise.

Section 80D

Section 80D, in effect, allows you to deduct the cost of your health insurance premiums. However, since many insurers offer a term plan with a critical illness rider, further Section 80D benefits can be obtained.

If you have selected health-related riders such as Critical Illness cover, Surgical Care cover, and related covers, you can take advantage of the term insurance tax benefit under section 80D. In other words, by applying these riders to your term insurance premiums, you can save money on taxes while also receiving health insurance coverage.

Key Facts About Term Insurance Tax Benefits Under Section 80D

  • Additional tax savings of Rs 25000 can be received if the life insurance plan is bought on behalf of the parents.
  • Tax deductions are only available if the amount is less than Rs 25000.
  • In the case that the parents are old. Under Section 80D, the maximum amount that can be claimed is Rs 50000.

Section 10 (10D)

Apart from the term insurance tax benefits, the life insured and his or her family members can save money by taking advantage of tax exemptions.This is covered in Section 10(10D).
To put it differently, the death benefit or maturity benefit received from a term insurance policy is tax-free. This is also subject to the various terms and conditions therein. It means that the full amount paid to you or your loved ones under the term plan is tax-free.
As a term insurance policyholder, you should be aware that the Section 10(10D) tax benefits are subject to specific conditions. It states that if the premium paid throughout the policy period does not exceed 20% of the predetermined sum assured, the maturity or death benefits under a term plan are not taxable.

Key Facts About Term Insurance Tax Benefits Under Section 10 (10D)

  • For insurance plans bought after April 1, 2012, the premium should not exceed 10% of the assured sum.
  • Any sum paid out under the insurance plan is subject to Section 10(10D). It could be in the case of the death of the policyholder, the plan maturing, or other bonuses.
  • Between April 1, 2003, and March 31, 2012, life insurance policies should have a premium of less than 20% of the assured sum.
  • Any gains from Unit-Linked Insurance Plans (ULIPs) and Single Premium Life Insurance Policies are also covered under this section (if the aforementioned conditions are met).

Tax Benefits On Term Insurance Riders

Insurance companies provide a range of term insurance riders to provide extra coverage. Their benefits, on the other hand, are not limited to improving the main features of a term insurance policy.

Additional term insurance tax benefits are available depending on the rider you select with a term plan and related conditions. Term plan riders can help you get more term life insurance tax benefits in a few different ways:

  • When you add the Critical Illness rider to your term plan, you are eligible for tax deductions under Section 80D.
  • When riders like Return of Premium are added to a term plan at the time of purchase, the premium increases, enabling you to save more money under Section 80C. Using an online calculator, you can see how the premium increases when riders are added.

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