The fundamental goal of buying a term life insurance plan is to ensure your loved ones will not experience financial stress in your absence. However, paying your term insurance premiums can earn you some benefits that you may not have expected.
If you have opted for the old tax regime and are paying term life insurance premiums, you may be able to claim exemptions under Section 80C of the Income Tax Act, 1961. Depending on the policy chosen, you may also be able to claim similar term insurance premium tax benefits under Section 80D of the Income Tax Act, 1961, which covers premiums paid towards health coverage.**
How can that be done? How can you cover and claim exemptions for health coverage with term life insurance premiums? Let’s find out.
Term Insurance Tax Benefits**
Term insurance provides tax benefits under three primary sections of the Income Tax Act: Section 80C, Section 80D, and Section 10(10D). Each section offers unique advantages, contributing to overall tax savings.
Section 80C: Term Insurance Premium Tax Benefit
Under Section 80C of the Income Tax Act, premiums paid towards term insurance policies are eligible for tax deductions. It is applicable to premiums paid for self, spouse, and children.
Eligibility: Individual and Hindu Undivided Family (HUF) taxpayers.
Deduction Limit: Up to ₹1.5 lakhs per annum.
Conditions: The premium paid should not exceed 10% of the sum assured for policies issued after April 1, 2012. For policies issued before this date, the premium should not exceed 20% of the sum assured.
Section 80D: Term Insurance Tax Exemption for Health Riders
Section 80D provides tax benefits for premiums paid towards health-related riders attached to term insurance plans. It includes health insurance premiums for self, spouse, children, and parents. For example, if you have attached a rider to your term life insurance policy that brings you health insurance benefits, such as a critical illness rider add-on, you may want to consider making a term insurance tax exemption claim under this section.
Section 10(10D): Tax Exemption on Death Benefit
Section 10(10D) of the Income Tax Act provides tax exemptions on the death benefit received from term insurance plans. It is applicable for all term insurance plans meeting the specified conditions. So, if your nominee makes a claim on your primary term insurance benefit, they do not have to pay taxes on the received amount, if they claim an exemption under this section.
Eligibility: The death benefit received by the nominee is fully exempt from tax.
Conditions: The premium paid should not exceed 10% of the sum assured for policies issued after April 1, 2012. For policies issued before this date, the premium should not exceed 20% of the sum assured.
Importance of Term Life Insurance**
Earning tax exemptions for the premiums paid and benefits received from your term life insurance policy is a worthwhile proposition for getting a new policy. However, the fundamental purpose of buying a term life insurance policy should ideally be to get some form of financial protection for your loved ones. The term insurance deduction in income tax for premiums and benefits received could be viewed as an additional advantage of buying term insurance.
To better understand the benefits you may expect, you may consult a financial advisor. You may also use a term insurance calculator, which is a valuable tool that helps you determine the appropriate coverage amount and premium based on your financial needs and liabilities. This may help you understand how much tax exemption you may be able to claim.
Term insurance is not only a crucial tool for financial protection but also offers significant tax benefits under Sections 80C, 80D, and 10(10D). By understanding these tax benefits and claiming them appropriately, you can make informed decisions to maximise your tax savings while ensuring comprehensive coverage for your loved ones. Putting your hard-earned money in the right term insurance plans at the right time can help secure your family's financial future and provide peace of mind, knowing that they are protected even in your absence.**
** Tax exemptions are as per applicable tax laws from time to time.
Disclaimers:
Disclaimers: 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 ________________ UIN ____________ is only the name of the Life Insurance Product 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. Advt.
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