One of the advantages of having term insurance, besides the net of financial security it provides for your loved ones, is the tax benefit. The benefit exists thanks to certain sections of the Income Tax Act.
If you have a term plan and are looking to earn tax exemptions on the same, it is important to know which section term insurance comes under.
Term Insurance Tax Benefits
The term insurance tax benefits or exemptions earned usually involve the premiums paid and the payouts received, if any, from the policy. Here are the sections under which you may be able to claim exemptions for your term insurance policy.
It is the primary section under which premiums paid for this sort of life insurance policy are eligible for tax deductions.
Under Section 80C, you can claim a deduction of up to ₹1.5 lakh per annum on the premiums paid for a term insurance policy.
The deduction is available for policies taken in the name of the individual, their spouse, or children.
It deals with the tax treatment of the payouts received from term insurance.
The sum assured received by the nominee in the event of the policyholder's death is fully exempt from tax under Section 10(10D).
Though term insurance generally does not offer maturity benefits, in cases where such benefits exist, they are also exempt under specific conditions.
The benefit can be claimed provided that the term insurance is in force for 2+ years and issued after April 1, 2012
We understand that we are talking about pure term insurance where the payout is received only in the event of death
It primarily relates to health insurance premiums. However, there may still be scope for you to claim term insurance tax benefits under Section 80D. If your term insurance policy includes a health-related rider, such as critical illness or hospital cash benefit, the premium paid for this rider may be eligible for deduction under Section 80D, up to ₹25,000 (₹50,000 for senior citizens).
Any tax exemptions you may earn from your term insurance plan are subject to the current regulations defined by the Income Tax Act, 1961. When buying a term plan, using a term insurance calculator may help you determine the optimal coverage and premium that fits your financial goals and tax-saving needs. While term plans may offer substantial tax benefits, ensure that you keep the primary goals in mind when deciding on your premium and coverage.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. IndiaFirst Life Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and IndiaFirst Life and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
Under no circumstances, including but not limited to negligence, shall IndiaFirst Life or its directors or employees be liable for any special or consequential damages that are alleged to have resulted from the use and/or inability to use this site or information contained within, even if IndiaFirst Life and/or its employees or directors have been notified of the possibilities of potential damages or losses.
Tax benefits are as per the prevailing Income Tax Laws including the Income Tax Act, 1961 and are subject to change from time to time.
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