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Term Insurance Tax Benefits
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Term insurance plans are affordable than most other life insurance plans available and are tax efficient. This means you can claim annual tax deductions on your term insurance premiums under Sections 80C & 80D of the Income Tax Act, 1961. Let’s find out how!
What is Term Insurance?
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Term plans are a 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.
Popular Tata AIA Term Insurance Plans
Tata AIA
Sampoorna Raksha Supreme
A Non-Linked Non-Participating Individual Life Insurance Plan
(UIN:110N160V04)
Tata AIA
SRS Vitality Protect
Solution Composition
Tata AIA SRS Vitality Protect is a term solution which includes Tata AIA Life Insurance Sampoorna Raksha Supreme, a non-linked, non-participating, individual life insurance plan (UIN: 110N160V04) and Tata AIA Vitality Protect, a non-linked, non-participating, individual health rider (UIN: 110B046V02). Tata AIA Life Insurance Sampoorna Raksha Supreme is available individually for sale.
Tata AIA
Maha Raksha Supreme Select
Non-Linked, Non-Participating, Individual Life Insurance Product
(UIN: 110N171V01)
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. |
|
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) |
Understanding Term Insurance Tax Benefit Sections
You can claim annual tax# deductions on your term plan premiums for the entire duration of your policy term under Section of the Income Tax Act of 1961. These tax benefits can help to significantly reduce your tax liability, thus lowering your taxable income.
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.
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.
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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 death benefits paid out are from a term policy that was issued on or after March 31, 2012.
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.
Also Read: Section 10(10D) of Income Tax Act - Benefits and Exemptions
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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.
Also Read: Section 80D - Deductions for Health and Medical Insurance
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
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.
Wrapping Up!
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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!
Frequently Asked Questions
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.
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.
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:
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.
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. They will not cost more than 30% of your premium paid on the basic insurance policy. Moreover, the premiums paid towards them can be claimed as deductions under Section 80C.
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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Disclaimers
The complete name of Tata AIA Sampoorna Raksha Supreme is Tata AIA Life Insurance Sampoorna Raksha Supreme (UIN:110N160V04) - A Non-Linked Non-Participating Individual Life Insurance Plan
Tata AIA SRS Vitality Protect is a term solution which includes Tata AIA Life Insurance Sampoorna Raksha Supreme, a non-linked, non-participating, individual life insurance plan (UIN: 110N160V04) and Tata AIA Vitality Protect, a non-linked, non-participating, individual health rider (UIN: 110B046V02). Tata AIA Life Insurance Sampoorna Raksha Supreme is available individually for sale.
Tata AIA Maha Raksha Supreme Select (UIN: 110N171V01) - Non-Linked, Non-Participating, Individual Life Insurance Product
*Illustrated Premium is the monthly premium excluding taxes for 20 yr. old female, Standard Life, Non-Smoker for 1 Cr. Sum Assured with Policy Term of 20 yrs. (Regular Pay) under Life Option. Please refer Benefit Illustration for more details. Premium is subject to applicable taxes, cesses & levies which will be entirely borne/ paid by the Policyholder, in addition to the payment of such Premium. Tata AIA Life shall have the right to claim, deduct, adjust, recover the amount of any applicable tax or imposition, levied by any statutory or administrative body, from the benefits payable under the Policy. Kindly refer the sales illustration for the exact premium.
#Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfillment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implication mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
+Tax benefits of up to ₹46,800 u/s 80C is calculated at highest tax slab rate of 31.20% (including cess excluding surcharge) on life insurance premium paid of ₹1,50,000. Tax benefits under the policy are subject to conditions laid under Section 80C, 80D,10(10D), 115BAC and other applicable provisions of the Income Tax Act,1961. Good and Service tax and Cess if any will be charged extra as per prevailing rates. The Tax Free income is subject to conditions specified under section 10(10D) and other applicable provisions of the Income Tax Act,1961. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.
~Applicable for specific plan options. Please refer brochure for additional details.
^Applicable for specific plan options. Please refer brochure for additional details.
**On enrolling into the Wellness Program, you get an upfront discount of 5% on 1st year premium for Accidental Death, Accidental Total & Permanent Disability, Accidental Disability Care Benefits and of 10% on 1st year premium for Term Booster, CritiCare Plus, Accelerated CritiCare, Multistage CritiCare, Cancer Care, Cardiac Care. The rewards are offered on cumulative basis and in any year, the maximum rewards in view of both the Up-front Rewards and Annual Rewards Flex together or Cover Booster (applicable post premium payment Term) shall be 15% for Accidental Death, Accidental Total & Permanent Disability, Accidental Disability Care and 30% for all other benefit options. Discount is driven by accumulated points which is achieved through wellness status. Please refer policy document for more details.
$Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch.
This plan offers pure risk cover under Life Option and return of premium benefit under Life Plus Option. Additional options are also available in this plan. Please refer sales brochure for complete details.
This product is underwritten by Tata AIA Life Insurance Company Ltd.
The plan is not a guaranteed issuance plan, and it will be subject to company’s underwriting and acceptance.
Insurance cover is available under this product.
For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale. The precise terms and condition of this plan are specified in the Policy Contract.
Buying a Life Insurance Policy is a long-term commitment. An early termination of the Policy usually involves high costs, and the Surrender Value payable may be less than the all the Premiums Paid.
In case of non-standard lives and on submission of non-standard age proof, extra premiums will be charged as per our underwriting guidelines.
This publication is for general circulation only. This document is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. This document is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
L&C/Advt/2023/Dec/4350
