Term Insurance Tax Benefits


Saving money is an important component of life for everyone. Every individual seeks strategies to lower tax responsibility, especially when it comes to saving taxes. You can also get tax breaks by purchasing term insurance. You might acquire term insurance tax benefits in addition to life insurance. However, one should know a few things about term insurance advantages in income tax.

Term insurance, the most simple type of life insurance policy, provides an individual with life insurance coverage for a set period of time in exchange for the regular payment. If the life insured dies during the active policy period, the policy nominee, as mentioned on the policy, will receive a death benefit as stipulated in the policy inclusion conditions.

A term insurance policy is very reasonable, and you can get additional advantages by adding add-ons/riders to it. You should also be aware that pure-term insurance has no monetary value and hence provides no survival benefit. By investing in a good plan, you can obtain numerous other benefits, such as term insurance tax benefits.

When you buy a term insurance plan, you can take advantage of not one but many term insurance tax breaks. These perks allow you to save money on taxes while also safeguarding your loved one’s financial future.

Let’s take a closer look at the term insurance tax benefits to get answers to some common cases. The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime. These are also subject to change with any changes in laws.

  • Section 80C

Section 80C of the Income Tax Act of 1961 governs the most basic term insurance tax benefits that every Indian taxpayer can obtain. Indeed, many people consider this Section to be the most popular tax-saving strategy. Term insurance policy tax benefits of up to Rs. 1.5 Lakh can be availed of under this Section for premiums paid for purchasing the plans. The upper limit of tax deductions possible under Section 80C also includes tax benefits on investments in PPF, tax-saving Fixed Deposits, and a variety of other tax-saving products. You can optimise term life insurance tax benefits by purchasing a big life insurance policy for yourself, which will help your family members in the long run.

Important Facts About Term Insurance Tax Benefits U/S 80C

  1. The annual premiums for term plans shall not exceed 10% of the total assured. If it exceeds this amount, the term insurance tax benefits u/S 80C will be applied proportionally.
  2. For term insurance plans issued before March 31, 2012, term insurance benefits are taxable if the annual premium is less than 20% of the total assured.

  • Section 80D

Section 80D primarily enables tax deductions for health insurance premiums. It does, however, provide term insurance tax benefits, although in an indirect manner. If you have chosen health-related riders such as Critical Illness cover, Surgical Care cover, and comparable covers, you can claim a term insurance tax benefit under 80D. In other words, by selecting these riders along with health insurance coverage, you can optimise tax savings with your term insurance rates. You can get a term insurance tax break if you buy Critical Illness Cover with a term insurance plan.

  • Section 10D

Aside from the term insurance tax benefits, the life insured and his or her family members might save money through tax exemptions. Section 10 addresses this (10D). Simply put, the maturity benefit received from a term insurance policy is tax-free. This is also subject to the numerous conditions specified. In general, there is no upper limit to these term insurance tax benefits. It means that the full sum you or your loved ones receive under the term plan is tax-free. You can use a term insurance calculator for research. As a term insurance policyholder, you should be aware that the tax benefits provided by Section 10(10D) are also subject to certain circumstances. It specifies that the maturity or death benefits from a term plan are not taxable if the premium paid during the policy period does not exceed 20% of the predetermined sum insured. Insurance firms give various term insurance riders to provide further coverage. However, their advantages go beyond simply enhancing a term insurance policy’s main features. *All savings are provided by the insurer as per the IRDAI-approved insurance plan. Standard T&C apply

Additional term insurance tax benefits that may be available depending on the rider you purchase with a term plan and related conditions. Here are a few ways that term plan riders can help you get more term life insurance tax breaks:

  1. When you add a Critical Illness rider to your term plan, you become eligible for Section 80D tax deductions.
  2. Riders such as Return of Premium, when selected while purchasing a term plan, raise the premium, saving you more money under Section 80C. Using an online term insurance calculator, you can see how the premium changes when riders are added.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

Source: https://www.iciciprulife.com/term-insurance/term-insurance-tax-benefits.html


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