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Get 1 Crore Term Insurance and Save Tax up to Rs 46,800++
Get 1 Crore Term Insurance and Save Tax up to Rs 46,800++
We always strive to provide for our families with all the comfort we can. And as long as we have the financial support in the form of our income, this can be possible. However, in a situation where you may not be around to care for them, their comfort and quality of lifestyle could be compromised. And hence, to prevent this, a term insurance plan is one of the best choices we can opt for.
Understanding that a pure term% plan will not offer any maturity benefits, paying the policy premiums may seem futile. But in reality, having term insurance life cover is the ultimate financial safety net for your loved ones. Moreover, to make things even better, there are tax benefits on your term insurance plan so that you can benefit from some savings on your premium payments. Take a brief look into the term insurance benefits in income tax.
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Term insurance offers pure life cover protection and is known as the simplest form of life insurance. Under a term insurance policy, the policyholder pays premiums towards the policy for a fixed term or a specific number of years to keep the policy in effect. The policy term or tenure, as well as the premium payment term and the premium payment mode, can be selected by the policyholder.
The insurance provider offers the term insurance life cover in return for these premiums that offer protection to the policyholder and their family members. Hence, in case the policyholder passes away during the course of the policy term, the insurance provider pays out the sum assured that was chosen by the policyholder at the time of purchasing the term policy.
Term insurance plans are generally preferred by many due to their affordable premiums and their flexible policy term and premium payment terms and modes.
When you buy a term life insurance plan, there are numerous benefits you can enjoy under the life cover. One of the main benefits is paying quite affordable premiums for a high sum assured that offers extensive life insurance coverage to you and your family. This ensures that they and their financial needs and interests can be protected when you cannot support them.
With a high sum assured or term life insurance coverage, your family can fulfil a number of financial obligations. Apart from the benefits offered by the term plan sum assured, you can also choose to enhance the coverage of your term insurance with the help of riders^. By paying an additional premium for any rider offered by your insurance provider, you can enjoy additional benefits such as coverage against critical illnesses, hospitalisation, terminal illnesses, major and minor illnesses and injuries, accidental death, and disability, and also opt for a waiver of premium! However, since riders come at an additional premium, it helps to consider adding only the riders you need to your term insurance plan instead of opting for all the riders offered.
Among the many other benefits, you can also avail of preferential premium rates as a woman policyholder or an affordable premium rate as a non-smoker or avail of a discount if you purchase your term plan policy through the official website of your insurance provider.
A Non-Linked Non-Participating Individual Life Insurance Plan (UIN:110N160V03)
TATA AIA
One of the main advantages of having a term insurance policy is the tax# benefit under the Income Tax Act of 1961. With many deductions and exemptions as per the tax laws, you can reduce your tax liability, thus, lowering your taxable income. Two such sections are Section 80C and Section 10(10D) of the Income Tax Act. Tax benefits on term insurance can be claimed by individuals and Hindu Undivided Family (HUFs) by claiming a deduction on the premiums paid for a term insurance policy.
Here are some of the benefits:
Term Insurance Tax Benefits under Section 80C
When you pay the term insurance premiums under the policy as per the premium payment term and mode of your choice, the premiums can be eligible for a tax deduction under Section 80C of the Income Tax Act. If you have a term plan that includes you, your spouse as well as your dependent children, all the premiums can be eligible for tax deductions. You can claim up to a maximum amount of ₹1.5 Lakh as per the income tax laws. You can file your returns and avail of these benefits either as an individual or as a member of a Hindu Undivided Family (HUF).
Term Insurance Tax Benefits Under 10 (10D)
It is not only your term insurance policy premiums but also the death benefits from your life cover that are eligible for tax benefits. As per Section 10 (10D) of the Income Tax Act, 1961, you can claim tax exemptions on the sum assured (paid as a death benefit or maturity benefit in case of a term plan with return of premium).
You can claim this tax exemption as:
A Salaried or non-salaried Individual
A Hindu Undivided Family
An Association
A Body of Persons
A Foreign Company
A Trust
Hence, in the event of the policyholder’s death, their family or nominee can receive the death benefit that is completely exempt from tax. This reduces the tax liability of the nominee/family and even more so since there is no upper limit for this tax benefit.
These are some of the conditions where this exemption cannot be applied:
If the amount is paid out under Section 80DD (3) of the Income Tax Act for the medical treatment and maintenance of a disabled nominee.
If the benefit is paid out under a Keyman Insurance Policy.
If the death benefits paid out are from a term policy that was issued on or after 31 March 2012.
Also, if the total premiums paid towards the policy exceed 20% of the sum assured, then this exemption will not be applicable.
And if the benefit comes from a term plan issued on or after 01 April 2012, the exemption benefit would apply only if the total premium paid is below 10% of the sum assured.
Term Insurance Tax Benefit Under Section 80D
When you purchase a term insurance plan, you can avail of the tax benefits on the premiums under Section 80C of the Income Tax Act. By adding riders^ to your term insurance plan, you pay additional premiums for these rider benefits. Hence, you can claim tax deductions on these riders under Section 80D.
However, in the case of a comprehensive health rider or a critical illness rider, you can claim a tax deduction on the premiums under Section 80D of the Income Tax Act.
It is crucial to note that since a tax benefit under Section 80D is applicable for health insurance, the riders added to your term insurance policy should be health riders if you want to claim tax deductions on your insurance policy. Hence, check your term plan properly to see if the riders you have added to your policy or intend to include offer any hospitalisation benefits or critical illness or terminal illness benefits. In this way, you will be able to claim a tax benefit under Section 80D.
Alternatively, you can also reach out to your life insurance provider or refer to the policy brochure carefully to check which riders qualify as health riders. This will help you claim the tax benefits when you are filing your tax returns.
Term Insurance Tax Deductions Benefits Summary Chart
Section |
Tax Benefits |
Section 80C |
The premiums paid towards the term insurance policy are eligible for tax deduction under this section. The maximum deduction applicable is up to ₹1.5 Lakh, and it applies to the premiums paid for self, your spouse, dependent children and also dependent parents. |
Section 10(10D) |
Under this section, the amount your nominee receives as the death benefit is exempt from tax, subject to certain terms and conditions. |
Section 80D (Applicable for Riders) |
Under this section, the premium amount paid towards riders purchased with a term insurance policy qualifies for deductions under Section 80D. |
Frequently Asked Questions
What are the sections for term insurance income tax benefits?
When you buy a term insurance plan, you can avail of tax deductions on the policy premiums under Section 80C of the Income Tax Act of 1961. The death benefit proceeds offered to the late policyholder’s nominee are tax-exempt as per Section 10(10D), while optional health rider premiums, if added to the term insurance policy, are eligible for tax deductions under Section 80D of the Income Tax Act.
How to calculate tax deductions?
You can calculate your income tax deductions pertaining to your taxable income using the online income tax calculator available on the official Tata AIA Life Insurance website.
Who is eligible for tax deductions under Section 80D of the Income Tax Act?
The policyholder of the term insurance plan, their parents, dependent children, and their spouse are eligible for tax deductions on the premiums paid towards the term insurance rider^ under Section 80D of the Income Tax Act.
Can I still get income tax benefits if I am not paying my term insurance premiums?
You can avail of tax deductions under Section 80C of the Income Tax Act on the annual premium amount payable towards the term insurance policy. However, suppose these premium payments are discontinued, in that case, your term insurance plan will be terminated, and not only will your family no longer be able to avail of the term insurance benefits but also you cannot claim any tax deductions.
Can I avail of tax benefits on term insurance riders?
If you select a comprehensive health rider that covers hospitalisation, critical illnesses, terminal illnesses and related risks and events along with a term insurance plan, then you can avail of tax deductions on such riders under Section 80D of the Income Tax Act.
What if I purchase a term plan based on the tax benefits I can get?
The main purpose of having term insurance is to ensure that your family can be safeguarded against financial uncertainties in your absence. Of course, tax benefits are an advantage when it comes to buying term insurance, but that should not be the only reason for investing in a plan. By solely considering the tax savings, you may end up choosing a term plan that does not meet your family’s financial requirements, which means the coverage will be inadequate.
Will income tax deductions affect my term insurance sum assured?
The term insurance sum assured that is paid out to your family in the event of your demise during the policy term is a predetermined and assured amount. It is guaranteed that a fixed sum assured will be paid out to them as the death benefit. While you can claim the tax deductions on your policy premiums under Section 80C of the Income Tax Act, this will not affect the sum assured.
How do I maximise my term insurance benefits?
If you want to maximise your term insurance benefits, be sure to choose a term insurance plan based on the needs of your family and your budget. Even though term insurance premiums are quite affordable, you can avail of lower premiums by purchasing a term insurance plan earlier in life. And to ensure that you and your family are covered under the life cover of the term plan, continue paying your term insurance premiums on time.
In case you need to increase your term insurance coverage, you can also choose to add one or a few optional riders for an additional premium. These riders can protect you and your family against specific risks and events such as critical illnesses, terminal illnesses, accidental death and disability and much more.
Where can I see the tax benefits of my term plan premiums on my income tax returns?
When you check your income tax return, you can see the tax benefit under ‘Deductions under Chapter VI A’. The amount of premium paid for your term plan will be shown under Section 80C below ‘Deductions under Chapter VI A’, and it is deducted from the gross taxable income.
I bought a term plan with a return of premium in 2005, paid an annual premium of INR 15,000 for a sum assured of INR 20 Lakh, and the policy will mature next month. Will the premium refund be exempt from tax?
Seeing that the annual premium was 20% of the sum assured of INR 20 Lakh, your maturity proceeds, i.e., the return of premiums, will be eligible for tax exemptions under Section 10(10D) of the Income Tax Act, 1961. As a result of this, the benefits you receive on maturity, will be tax-free.
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