A Guide to Life Insurance Policy’s Tax Benefits and Taxability

Buy a life insurance plan in a few clicks

Now you can buy life insurance plans completely online right here.

  • Icon for Kotak Preferred e-Term Plan

    Kotak e-Term Plan

    Kotak e-Term Plan is a pure term plan that provides a high level of protection to your loved ones in your absence.

  • Icon for Kotak Preferred e-Term Plan

    Kotak Health Shield

    The Kotak Health Shield Plan helps secure your finances in times of sudden medical expenses related to illness such as Cardiac, Liver, Neuro and Cancer (all early and major stages of illness /conditions of Cancer); along with offering protection for Personal Accident - in case of accidental death or disability.

  • Kotak E-Invest Plan

    Kotak e-Invest is a comprehensive Unit Linked Life Insurance Plan that can be customized as per your goals and needs - be it protection; investment; financial security for child or retirement planning.

  • Icon for Kotak Preferred e-Term Plan

    Kotak Lifetime Income Plan

    Kotak Lifetime Income Plan gives you the assurance of your income continuing throughout your life and in your absence throughout the lifetime of your spouse!


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.


A Guide to Life Insurance Policy’s Tax Benefits and Taxability

  • 18th Nov 2019
  • 3,055

Save Tax Now A Guide to Life Insurance Policy’s Tax Benefits and Taxability

Buying a life insurance plan is very important for people who have dependent family members. The policy will help you protect the financial future of your parents, spouse,and children. When it comes to finding a suitable life insurance cover, insurance companies in India provide a variety of choices. When buying a suitable life plan, make sure to learn about the life insurance tax implications so that you can plan your finances accordingly Here are the important taxability instances that you need to keep in mind

1. Deduction under Section 80C

Under Section 80C of the Indian Income Tax Act, 1961, any premium paid towards a life insurance plan for yourself, your spouse, and your children is tax-deductible.An important point to remember is that to get the benefit for any policy issued on or after April 1, 2012, the premium you pay should not be more than 10% of the sum insured.

2. Exemption under Section 10(10D) on the maturity benefit

Section 10(10D) of the Income Tax Act allows tax exemption on the maturity benefit and bonuses received from your life policy. To be eligible for this income tax deduction the premium you paid must not be more than 20 % of the sum assured for policies issued before April 1, 2012, and 10% for the policies issued after April 1,2012.

3.When the maturity benefit is taxable

There are certain situations when Section 10(10D) does not apply to the maturity benefits. If the premium you paid towards the life insurance policy is more than 10% of the sum assured for policies issued after April 1, 2012, you will not receive the tax benefit. For policies bought before 1st April 2012, if the premium paid is over 20% of the sum assured then you will not be eligible for the tax benefit. This rule for taxability of the life insurance maturity amount is an important one to remember.

4.TDS on the life insurance policy

Since October 2014, insurance companies are eligible to implicate 1% Tax Deducted at Source (TDS) on the life insurance benefit if the amount is more than INR 1 lakh. It was raised to 5% from the previous TDS of 1% in the Union Budget 2019. TDS is also applicable to the bonuses received by you. When filing your tax return,you are entitled to receive credit for the TDS charged by the insurer.

5.Tax implication of single premium life insurance policies

For a single premium payment life insurance policy,the premium paid is often more than 10% of the sum assured. Hence, the maturity benefit of the policy will be taxable. For example, if you had bought a policy with a maturity value of INR 1.1 lakh on September 16, 2013, the single premium will be approximately INR 45,000, which is over 10% of the sum assured. If you surrender the policy on September 16, 2019, the insurer will charge 5% TDS on the net maturity proceeds.

When you are purchasing term insurance, remember the aforementioned tax implications. You will need to consider them when filing for your tax return.

Invest in Term Insurance now and Save Tax

Read Here for More Related Articles:

- A Consumer Education Initiative series by Kotak Life


Also read

  • Impact of GST on Life Insurance in India

    GST impact on Life Insurance? After the introduction of GST, the premium rates increased with taxes on the entire premium. Read more on GST impact on ...

    Read more
    • 22nd Nov 2021
    • 442

    What is Section 10D of the Income Tax Act?

    One of the most prominent income tax savings sections is section 10D of Income Tax Act. Visit now to know more about section 10D.

    Read more
  • Things to Do After Filing Income Tax Returns

    Your job isn’t over after filing income tax return online. There are additional things like to verify tax returns, check income tax refund status. R...

    Read more

Related Plans

  • Kotak e-Term Plan - Online Term Insurance

    Kotak e-Term Plan - Online Term Insurance

    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 Assured Savings Plan

    Kotak Assured Savings Plan

    Kotak Assured Savings Plan is an affordable protection plan that enables you to accumulate wealth and strengthens your finances for the future.

    Know more
  • Kotak Guaranteed Savings Plan

    Kotak Guaranteed Savings Plan

    A Non-Linked Non-Participating Life Insurance plan

    Know more