Term life insurance plans are a vital financial instrument providing a safety net for your family while offering significant tax benefits. If you have been wondering, “Which section does term insurance tax benefit fall under in India, the two sections you need to look into are Section 80C and Section 80D of the Income Tax Act, 1961. Depending on the rider chosen, you can claim exemptions under both these sections for the premium paid for your term insurance policy.**
Understanding Term Insurance
It is a type of life insurance that offers coverage for a specific period or "term" of years. If the insured dies during the term, the death benefit is paid to the nominee. Unlike some other life insurance policies, term insurance does not have an investment component.
Some of the key features of a term life insurance plan are:
High Coverage at Low Premiums:
Provides substantial life cover at affordable rates.
Flexible Terms:
You can choose the policy term based on your financial goals.
Tax Benefits:
Significant tax deductions under Sections 80C and 80D.
Using a Term Insurance Calculator
A term insurance calculator is an essential tool for estimating the premium for the desired coverage. By inputting details such as age, sum assured, policy term, and health status, you can get an accurate premium amount. This tool is crucial for budgeting and planning your insurance needs.
Section 80C: Tax Benefits on Term Insurance Premiums**
Section 80C of the Income Tax Act in India allows individuals and Hindu Undivided Families (HUFs) to claim deductions up to INR 1.5 lakh per annum on various investments and expenses, including premiums paid on term insurance or other life insurance plans, provident fund contributions, and tuition fees. This section is a key component of tax-saving strategies, encouraging savings and investments among taxpayers. The policy must be in the name of the taxpayer, their spouse, or children.
If you pay premiums for your term insurance, Section 80C may be helpful for you to claim exemptions. However, the premium should not exceed 10% of the sum assured if the policy was issued on or after April 1, 2012. For policies issued before this date, the limit is 20% of the sum assured.
How to Claim Deductions Under Section 80C**
Here’s how you can make use of this section to claim a deduction for your term insurance premium.
Collect Premium Receipts:
Ensure all receipts of premiums paid are collected.
Verify Policy Details:
Check whether the policy meets the conditions for deduction.
Include in ITR:
Declare the premium paid under Section 80C in your Income Tax Return (ITR).
Maintain Documentation:
Keep copies of the policy along with the payment proofs for verification.
Section 80D: Tax Benefits on Health Riders with Term Insurance**
Section 80D provides deductions for premiums paid towards health insurance, including health riders added to term insurance policies. The maximum deduction is INR 25,000 for individuals below 60 years and INR 50,000 for senior citizens. subject to overall limit of INR 50,000/ INR 75,000/ INR 1,00,000*
*Limit of INR 50,000 shall be applicable in cases where individual and parents are all under the age of 60 years.
Limit of INR 75,000 shall be applicable in cases where individual and family are under the age of 60 years but Parents are over the age of 60 years
Limit of INR 1,00,000 shall be applicable where individual, family and parents are all over the age of 60 years.
This includes deductions for health riders such as critical illness riders attached to term insurance policies.
When claiming for term insurance under Section 80D, you can declare premiums paid for your term plan with a healthcare rider. This may prove to be helpful for those who have opted for health coverage along with term insurance.
How to Claim Deductions Under Section 80D**
Here are a few things to remember if you are looking to claim exemptions for your term insurance policy with healthcare riders under Section 80D of the Income Tax Act, 1961.
Collect Health Rider Premium Receipts:
Gather receipts for health riders' premiums.
Check Eligibility:
Ensure the premiums fall within the permissible limits.
Declare in ITR:
Include the premiums under Section 80D in your Income Tax Return.
Documentation:
Maintain detailed records of premiums and policies.
Benefits of Term Insurance
With claiming exemptions for term insurance premiums, you may expect the following from getting a term insurance plan, especially with healthcare riders.
Claiming tax benefits for term insurance under Sections 80C and 80D is straightforward yet beneficial. By understanding the term insurance tax benefit and under which section it applies, you can make informed decisions about your insurance goals and tax planning. Ensure you maintain all necessary documentation and declare your premiums correctly in your Income Tax Return.**
Disclaimers:
** Tax exemptions are as per applicable tax laws from time to time.
IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North Tower, Building 4, Nesco IT Park, Nesco Centre, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 18002098700. Email id: customer.first@indiafirstlife.com, Website: www.indiafirstlife.com. Fax No.: +912268570600. IndiaFirst Life Insurance Company Limited is only the name of the Life Insurance Company and does not in any way indicate the quality of the contract, its future prospects, or returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd under License.
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