Is the GST paid on term insurance premiums deductible under Section 80C?

GST of 18% is applicable on term insurance policies. As a policyholder, you can claim a deduction against the @GST paid for your term insurance premiums – Given that it is within the ₹1.5 lakh limit under Section 80C.

How do I maximize my term insurance benefits?

A popular way to get the most out of your term insurance would be through add-on riders$. They allow you to widen your insurance coverage and they are cheaper when bought on policy purchase.

Where can I see the term insurance tax benefit sections of my 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, with an annual premium of ₹15,000 for a sum assured of ₹20 Lakh. Will the premium refund be exempt from tax on maturity?

Yes. Seeing that the annual premium was 20% of the sum assured of ₹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.

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Term Insurance Tax Benefits

You can claim tax deductions on your term insurance premiums up to a maximum amount of ₹1.5 Lakh per annum under section 80C of the... Income Tax Act, 1961.

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Term Insurance Tax# Benefit Sections: A Quick View

IT Act Sections	Tax^# Benefits	Eligibility
Section 80C	Deductions up to ₹1.5 lakhs for annual premiums paid towards the term insurance policy.	Individuals and Hindu Undivided Family (HUF)
Section 10(10D)	Full death benefit amount is tax-exempt. Maturity benefit amounts are exempt, subject to certain terms and conditions.	1. Salaried or non-salaried Individuals 2. Hindu Undivided Family (HUF) Associations 3. Body of Persons 4. Foreign Companies 5. Trusts
Section 80D (Applicable for Tata AIA health riders and term plans with medical insurance coverage)	Deduction of up to ₹25,000 or ₹50,000 (for senior citizens) for the annual premium amount(s) paid towards medical insurance or health riders purchased with a term insurance policy.	Individuals and Hindu Undivided Family (HUF)

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Non-Linked, Non-Participating, pure risk, Individual Life Insurance Product (UIN:110N176V01)

What is Term Insurance and How Does It Help in Tax Saving?

Term insurance is type of life insurance policy that offer pure risk coverage in the form of a death benefit, i.e., the individual’s family will be paid a lump sum amount (also called as sum assured) in the event of their death of the life assured during the policy term.

This death benefit amount can be used for anything upon payment and is fully tax-exempt under Section 10 (10D). Term plans are generally affordable than other life policies, have fixed premiums and their policy terms usually range from 5 - 40 years.

This means you will not get any payments from the insurer if you survive the policy term – unless you have bought a Term Plan with a Return of Premium(ROP) feature.

Term Insurance Tax Benefit Section 80C: Premium Payments

Under Section 80C, premiums paid towards the upkeep of your term insurance policy are eligible for tax deductions. The deductions are allowed on a payment basis, i.e., all premiums paid within a financial year can only be claimed as a deduction in that financial year.

Individuals and Hindu Undivided Families (HUFs) are eligible for this tax deduction. For individuals, the term insurance policy can be taken in the name of the taxpayer or their spouse and dependent children.

You can claim up to a maximum amount of ₹1.5 Lakh as per the income tax laws. For example, you can have a term plan that includes you, your spouse and dependent children. All the premiums under the policy will be eligible for tax# deductions.

Here are some conditions to keep in mind before filing tax deductions for term insurance under 80C:

For term policies issued on or before March 31, 2012, the deduction will be restricted to 20% of the sum assured. E.g., if the sum assured is 30,000 and the premium is ₹8,000; Up to ₹6,000 can be claimed as a deduction.
For term policies issued on or after April 1, 2012, the deduction will be restricted to 10% of the sum assured. E.g., If the sum assured is ₹2 lakhs, and the premium is ₹30,000, you can claim ₹20,000 as a deduction.
Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—
(a) a person with disability or a person with severe disability as referred to in section 80U,
or
(b) suffering from disease or ailment as specified in the rules made under section 80DDB,the deduction will be restricted to 15% of the sum assured.
For a single premium payment, the sum assured should be 10 times the sum assured to claim the full deduction amount – ₹1.5 lakhs. If not, only 10% of the sum assured can be claimed as a deduction.
E.g. If the premium is ₹1.2 lakhs, the sum assured should be ₹12 lakhs. If the sum assured is ₹7 lakhs, only ₹70,000 can be claimed as a deduction.
The term policy must be held for a minimum of 2 years as per Section 80C(5). If the policy is surrendered within 2 years, then any deductions filed will be deemed as income from the previous year of termination, sale, etc. No deductions will be allowed under the policy on the year of termination/surrender.

Term Insurance Tax Exemption Section 10 (10D): Death Benefit and Maturity Payouts

Only the death benefit amounts paid under term insurance policies are fully tax^#-exempt under Section 10 (10D) of the Income Tax Act, 1961. Hence, in the event of the policyholder’s death, their family can receive the full death benefit amount.

For maturity benefits, term insurance plans purchased on or after April 1, 2023, will have their maturity payout amounts taxed if the annual premium exceeds ₹5 lakhs. The amount will be taxed as per the policyholder’s tax slab rate. .

Most taxpayers can claim the amount if they are mentioned as a policy nominee or beneficiary under the term plan. .

Here are some scenarios where the term insurance tax exemption cannot be applied, and your beneficiary may need to pay tax on the payout amounts:

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 total premiums paid towards the policy exceed 20% of the sum assured.
For term plans issued on or after April 1, 2012, the exemption benefit would apply only if the total premium paid is below 10% of the sum assured.

Term Insurance Tax Benefit Section 80D: Health Riders^$ and Medical Coverage

Additional premiums paid for term plan health riders^$ that offer medical insurance coverage can be claimed as a deduction under Section 80D. For example, a critical illness health rider under your term plan can make you eligible for this deduction.

Individuals and HUF taxpayers are eligible to claim a maximum deduction of up to ₹25,000 or ₹50,000 (for senior citizens over 60) on annual premium payments.

Under this deduction, annual preventative health check-ups up to ₹5,000 can also be included within the total deduction amount of ₹25,000/₹50,000.

You should note that medical insurance premiums should be paid by any mode other than cash to be eligible for deductions. However, payments for preventive health check-ups can be made in cash.

Term insurance 80C and 80D Benefits Under Add-On Riders^$

You can choose to enhance the coverage of your term insurance with the help of riders^$. These will require an additional premium and will increase your overall term insurance premiums.

However, the premiums paid towards add-on riders can be included under your term insurance 80C deductions. As stated, you can claim a maximum deduction amount of ₹1.5 lakhs per year, subject to the terms stated above.

Moreover, medical coverage under term plans generally comes in the form of health riders and add-on covers. These can make you eligible for additional deductions under Section 80D. This deduction is also applicable over and above the limit under Section 80C.

How to Claim Term Insurance Tax^# Benefits?

Term insurance 80C tax benefits under term insurance premiums can be claimed when you file your income tax returns. The same applies to all other sections as well. For deductions under Section 80D, check your term plan properly to see if your chosen riders offer any medical coverage/insurance benefits.

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.

Calculate Term Insurance Premium

If you want to calculate your term insurance premium, you can check the various term insurance plans offered on our website and use our online term plan calculator to get the desired quotes!

Wrapping Up! – Tax Benefits on Term Plans

Term insurance plans offer a way to financially secure your family in your absence. They are tax efficient, affordable and offer a higher sum assured.

Moreover, having a thorough understanding of the term insurance tax benefit sections available under your term policy will allow you to plan your finances better. Thus, allowing you to secure your loved ones effectively.

All in all, term plans are worth looking into no matter what life stage you are in, as they cater to almost all financial goals. Feel free to browse our website for your perfect Tata AIA term insurance plan now that you know the plethora of tax^# benefits you can claim under them!

1.Will income tax deductions affect my term insurance sum assured?
The sum assured under term plans is a predetermined amount and will generally stay fixed – unless it is an increasing or decreasing term plan. Any tax deductions and exemptions made for premiums and maturity payout under the policy will not affect your sum assured amount.

2.Are the term insurance tax# benefit sections available under the new tax regime?
Only the term insurance tax exemptions under Section 10(10D) are available under the new and old tax regimes. Sections 80C and 80D will only be available under the older tax regime and are excluded under the new one.

3.How do I calculate my term insurance tax deductions?
You can calculate your income tax deductions using an online income tax calculator to get an accurate estimate.

These term insurance deductions are made by subtracting all the eligible deductions from your gross taxable income. Doing so will show you the total income on which you need to pay tax as per your tax slab. You can use either of these online calculators:

●Income Tax Department Income and Tax Calculator

4.Can I still get income tax benefits if I am not paying my term insurance premiums?
No, these deductions only apply to term insurance plans that are in effect. Any lapsed policies will not be eligible for deductions.

So, if you do not make your premium payments on time, your term insurance policy will be cancelled and will no longer be valid. Any tax deductions that were previously available under the plan will no longer to available to you.

You may choose to revive your policy by contacting us if you wish to reinstate your term coverage and be eligible for term insurance tax benefits under Sections 80C, 10(10D) and 80D