Is There Any Tax Benefit on Term Insurance?
Close

Buy a Life Insurance Plan in a few clicks

Close

Now you can buy life insurance plan online.

  • Icon for Kotak Preferred e-Term Plan

    Kotak e-Term Plan

    Kotak e-Term Plan provides a high level of protection to your loved ones in your absence.

  • Kotak E-Invest Plan

    Kotak e-Invest plan is a complete Unit-Linked Insurance Plan that can be customized as per your goals and needs.

  • Icon for Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan is a savings and protection plan that helps you achieve long-term financial goals and provides an insurance cover against any eventuality.

  • Icon for Kotak Preferred e-Term Plan

    Kotak Lifetime Income Plan

    Kotak Lifetime Income Plan gives you the security of your income continuing thru your life and in your absence throughout your spouse's lifetime!

  • Icon for Kotak Preferred e-Term Plan

    Kotak Health Shield

    Kotak Health Shield Plan helps secure your finances in sudden medical expenses such as Cardiac, Liver, Neuro, and Cancer (all early and significant illness stages/conditions of cancer), along with offering protection for personal accidents - in case of accidental death or disability.

Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Back

Is There Any Tax Benefit on Term Insurance?

Term Insurance Quote
  • 16th Dec 2021
  • 508

Is There Any Tax Benefit on Term Insurance?

Summary

Buying term insurance is a great way to ensure that your family has a financial cushion to fall back in case of any unpleasant eventuality. But do you know that you can avail of tax benefits on your term insurance as well? Read on to know more about it.

Term insurance is one of the most popular life insurance types. Many people prefer buying a term plan over types of policies because of the following reasons

● Term insurance can be a great way to provide financial support to your loved ones even when you are not around. 

● The premium of term insurance is relatively much lower than other life insurance policies.

● Term insurance can have higher death benefits and additional riders in comparison to regular life insurance.

In addition to these points, term insurance can also be used for availing certain tax exemptions, as discussed below

Exemption under Section 80C

A term insurance policyholder can avail of income-tax deductions under section 80C of the Income-tax Act of India. This deduction can be availed by

● the policyholder

● the wife or husband of the policyholder

● children of the policyholder 

In the case of Hindu Undivided families (HUF), any family member can receive tax benefits under section 80C.

However, you must understand the following clauses before claiming tax deductions.

● For policies issued before April 1, 2012

Tax deduction applies for the total premium value to a maximum of 20% of the sum assured.

● For policies issued on or after April 1, 2012

i. Tax deduction applies for the total premium value to a maximum of 10% of the sum assured.

ii. If the policyholder suffers from severe illness or disability, then a tax deduction is applicable if he/she haven’t paid premiums amounting to 15% or more of the total sum assured.

Exemptions under Section 10 (10D)

Under Section 10 (10D) of the Income Tax Act, the amount received under death benefit by the family members is tax-free.

However, the clause is not applicable in the following conditions.

● Amount received under Section 80DD (3) or 80DDA (3)

● Amount received under any Keyman insurance policy.

● Term insurance issued on or after April 1, 2012. In such cases, the exemption is allowed if the total premium paid is less than 10% of the sum assured.

Exemption under Section 80D

Tax exemptions under Section 80D can be claimed on term insurance only if you have an additional health cover like a critical illness rider. The benefits can be availed by 

● the policyholder

● the spouse of the policyholder

● the dependent children of the policyholder

● the parents of the policyholder

Again, exemptions under this section are subject to specific clauses that are mentioned below.

● The maximum amount of the tax deduction allowed under this clause is Rs 25,000.

● You can avail of an additional tax benefit of Rs. 25,000 if you have purchased a health insurance policy for senior citizen parents. 

Having discussed the various tax benefits that you can avail of on a term insurance plan, it is advised not to look at term insurance as a tax-saving instrument. Instead, consider the tax benefits as an additional gift that sweetens the deal. Remember, to enjoy a cup of coffee. Your priority should be the coffee, not the cream. 

- A Consumer Education Initiative series by Kotak Life

Also read

  • Term Insurance: What Happens When You Don’t Pay Your Premiums?

    If you fail to pay the Term Insurance Premium on time, you will no longer have the coverage provided by the policy. To know more, Visit Now

    Read more
  • Why Should You Not Take A Term Plan Without Medical Test in India?

    While purchasing a term plan without medical test, make sure that you do not hide any health condition or any lifestyle habit from the insurer. Click ...

    Read more
    • 21st Dec 2021
    • 297

    Term Vs. Whole Life Insurance: Which One You Should Buy in India?

    There are many ways in which Term Insurance Plans differ from Whole Life Insurance Plans. Click here to know which one you should buy.

    Read more

Related Plans

  • Kotak e-Term Plan

    Kotak e-Term Plan

    Get protected at less than Rs.19/day with Kotak e-Term Plan. Our term insurance plan combines best-in-class features & comprehensive coverage with...

    Know more
  • Kotak e-Term Plan

    Kotak e-Term Plan

    Kotak e-Term Plan is a pure term insurance plan that provides a holistic life protection at affordable prices. Find out the eligibility criteria, key ...

    Know more
  • Kotak Group Secure Capital Plan

    Kotak Group Secure Capital Plan

    Kotak Group Secure Capital Plan is a Non-Participating, Guaranteed Unit Linked Fund Based Group Life Insurance Plan. It enables Employers /Trusts to m...

    Know more
  • Kotak e-Invest

    Kotak e-Invest

    Kotak e-Invest - a comprehensive Unit Linked Life Insurance Plan that can be customized as per your goals and requirements.

    Know more