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Taxes are a huge cause of worry for everyone. However, you can always minimise the burden of your taxes by making the right investments. The Income Tax Act, 1961, offers all taxpayers specific exemptions on eligible investments. Some of these investments include tax-saving mutual funds, fixed deposits, pension plans, PPF, as well as life insurance policies.
Additionally, the tax* department provides specific exemptions for different insurance plans, such as life insurance policies and health care insurance. Irrespective of the type of insurance you choose, as an investment, all insurance policies serve three effective purposes. They offer you tax advantages, provide financial security against uncertainties, and also help you to build your corpus.
Here is everything you should know about the tax benefits of life insurance policies:
Which insurance is tax*-deductible?
Insurance policies in this day and age are a must. And to increase their value and improve its adaption, the government offers tax* advantages for these insurance plans:
- Life Insurance policies
- Health insurance policies
What are the tax benefits under life insurance policies?
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According to the Income Tax Act, 1961, each life insurance plan offers tax exemptions up to a specific limit under different sections of the act. The tax* benefits for different insurance plans are:
Life Insurance Policies
Life insurance policies are the primary insurance plans that people generally save in to get financial security for themselves and their family against an uncertain event in the future. In this policy, the insurance company promises to pay a specific amount (also called sum assured) to your nominee in case of your death during the term of the plan. However, if you survive the duration of the policy, some specific insurance plans like endowment plans, money-back plans and whole life insurance policies, give you a maturity value benefit.
Tax benefits of life insurance policies
Section 80C |
All life insurance policies are eligible for tax* exemption under Section 80C of the Income Tax Act, 1961. You get life insurance premium tax benefit on a life insurance policy, endowment plan, whole life insurance plans, money back policies, term insurances, as well as Unit Linked Insurance Plans (ULIPs). In addition, the following conditions apply: ⮚ The maximum deduction given under this section is up to ₹1.5 Lakh. ⮚ Tax exemption is given for premiums paid on insurance policies taken for self, spouse, dependent children, and in some cases dependent parents. |
Section 80CCC |
This section provides an exemption for any amount paid in annuity plan of Life Insurance Corporation of India or any other insurance company to secure a pension. The maximum deduction under this section is also up to ₹1.5 Lakh. |
Section 10(10D) |
Under this section, the amount you receive from the insurance company is fully exempt from income tax*, subject to some conditions. The exemption applies to the receipt of sum assured maturity value, surrender value and the death benefit. |
That said, you must note that if you cancel or withdraw any of the tax*-exempted life insurance plans before the expiry of five years, the deductions will stand cancelled. Your deductions will be included back in your income in the year of policy cancellation, and you would pay taxes accordingly.
- In the case of Section 10(10D), tax exemption is also subject to not more than 10% of the sum assured.
What are the tax benefits under health insurance policies?
Health Insurance Policies
A health insurance plan is an important constituent of your insurance portfolio. Given the rising medical costs and risk factors, health insurance policies have become more of a necessity than a choice. Health insurance policies provide you and your family financial protection in case of any medical emergencies. These policies provide extensive health coverage only and do not secure you against any other uncertainty. However, even these plans are eligible for tax exemption under the Income Tax Act, 1961.
Tax benefits of health insurance policies
Section |
Members Insured |
Deduction |
80D |
Self and family (age below 60 years) |
Up to ₹25,000 |
80D |
Self and family + parents (age below 60 years) |
Total up to ₹50,000 (25,000+25,000) |
80D |
Self and family + parents (above 60 years of age) |
Total up to ₹75,000 (25,000+50,000) |
80D |
Self and family (anyone above 60 years) + parents (over 60 years) |
Total up to ₹1,00,000 (50,000 + 50,000) |
80U |
Self with disability |
Up to ₹75,000 Up to ₹1.25 Lakh in case of severe disability |
80DD |
Any dependent family member (of any age) with disability |
Up to ₹75,000 Up to ₹1.25 Lakh in case of severe disability |
80DDB |
Self or dependent family member (below 60 years of age) with a specific disease |
Up to ₹40,000 |
80DDB |
Self or dependent family member (above 60 years of age) with a specific disease |
Up to ₹1,00,000 |
- The specific disease is neurological issues, chronic kidney failure, cancer, AIDS and haematological disorders.
- A deduction of ₹5,000 is given for preventive medical check-ups within these tax limits.
- You can claim the exemption even for riders# and add-ons of insurance plans, except for personal accident policies or riders#.
Choose TATA AIA tax-saving insurance plans
We understand your concern regarding taxes, and offers a range of savings-cum-life insurance plans that help you save taxes*, insure your life, protect your family’s future, and also build your corpus.
Each of these plans offers life insurance income tax* exemption and offer a different financial security benefit. Understand your needs and choose an insurance plan that best fits your requirements.
L&C/Advt/2023/Mar/0784
