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Term insurance tax benefits can allow you to reduce your tax liability and save money. Section 80C allows a deduction of up to ₹1,50,000 for premiums, and Section 10 (10D) covers tax-free maturity proceeds. If your policy includes health riders, you can also claim deductions under Section 80D.
Term insurance not only provides financial security but also helps you save on taxes. You can claim tax benefits under Sections 80C, 80D, and 10(10D) of the Income Tax Act 1961, through deductions on premiums and exemptions on payouts.
For example, premiums paid qualify for deductions under Section 80C, while maturity proceeds are tax-free under Section 10(10D). However, these benefits come with specific conditions, such as deduction limits, payment modes, and policy terms. Let’s explore these in detail.
The government provides tax benefits on term insurance to encourage financial security. The table below summarizes the key deductions and exemptions available under different sections:
| Section | Eligible Taxpayer | Deduction/Exemption Limit | Applicable To | Key Conditions |
| 80C | Individuals, HUFs | Up to ₹1,50,000 per year | Term insurance premiums | Premium ≤ 10% of sum assured (for policies issued after April 1, 2012) |
| 80D | Individuals, HUFs | ₹25,000 (below 60 years), ₹50,000 (above 60 years) | Premiums for health riders (critical illness, etc.) | Additional ₹25,000/₹50,000 deduction for parents’ health insurance |
| 10(10D) | Policyholder/Beneficiaries | Entire maturity/death benefit is tax-free | Maturity proceeds, death benefits | Sum assured should be at least 10 times the annual premium to be tax-exempt |
Payments Eligible for Deductions Under Section 80D
As discussed in the previous sections, you can avail yourself of deductions for term insurance under 80D. The premium payments will, however, be subject to the following eligibility criteria:
Section 10 (10D) exempts the maturity proceeds of a life insurance policy. This provision applies to both individual and HUF taxpayers, subject to the following conditions:
Insurance riders are additional features that policyholders can add to their base insurance policies to customize coverage according to their specific needs. While riders offer enhanced protection, it is essential to understand their tax implications to make informed decisions.
Premiums for critical illness riders are eligible for term insurance tax benefits under Section 80D. The lump-sum amount received upon diagnosis of a critical illness is tax-free under Section 10 (10D).
Premiums paid for accidental death riders are also eligible for deductions under Section 80C. The sum assured, paid in the event of accidental death, is exempt from income tax under Section 10 (10D).
Premiums for the waiver of premium rider are deductible under Section 80C. In case of total and permanent disability of the policyholder, future premiums may be waived off, providing financial relief without tax implications.
To maximize your term insurance tax benefit under Sections 80C, 80D, and 10(10D), it is essential to stay organized and meet all necessary requirements. Keeping a record of all premium payments made for yourself, your spouse, dependent children, and parents is crucial for a smooth claim process. If you want to avail of term insurance tax benefit under Section 80D, ensure your policy includes health riders, such as a critical illness cover.
Timely premium payments are equally important, as missing them can impact both your policy benefits and tax deductions. Planning in advance using a term insurance calculator can help you manage payments efficiently. While filing your income tax returns, make sure to submit premium receipts and other necessary documents, as accurate disclosure prevents penalties and ensures a hassle-free process. If needed, consulting a tax expert can further help you optimize savings and maximize your term insurance tax benefit.
While tax benefits make term insurance an attractive financial instrument, the real focus should be on securing adequate coverage for your family’s future. Consulting with a financial advisor can provide personalized guidance based on your financial goals and circumstances. You can select from a range of available plans such as ₹1 crore term insurance, ₹2 crore term insurance, term insurance for smokers, and more. The key is to compare multiple insurers and make an informed decision that balances premium costs with tax advantages.
1
Term insurance tax benefits refer to deductions available on premiums paid towards term insurance policies and tax-free proceeds received by beneficiaries upon the policyholder’s demise.
2
Any individual who pays premiums towards a term insurance policy, whether for themselves, their spouse, or their children, is eligible to claim term insurance tax benefits.
3
No, the death benefit received by beneficiaries under a term insurance policy is typically tax-free. However, certain exceptions may apply, such as if the policy has been assigned for consideration.
4
While tax benefits are a significant advantage of term insurance, it is advisable to purchase a term plan primarily for its financial protection benefits rather than solely for tax-saving purposes.
5
No, the claim amount received from a term insurance policy is generally tax-free for the beneficiaries under Section 10(10D) of the Income Tax Act.
6
You can maximize term insurance premium tax benefits by ensuring that your premiums do not exceed the specified limits and choosing the appropriate coverage based on your financial needs.
7
No, once you cancel a term insurance policy, you will no longer be eligible for tax benefits on the premiums paid.
8
No, term life insurance tax benefits on premiums are available only for active policies. Once the policy is terminated, the tax benefits cease to apply.
9
Yes, you can claim deductions under both Section 80C (for term insurance premiums) and Section 80D (for health insurance premiums) simultaneously, provided you meet the eligibility criteria for both deductions.
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Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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