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Term Insurance plan is the simplest type of Life Insurance policy. The insured gets coverage for a specified period, as 'Term'. Term insurance plans are very beneficial in terms of being immensely flexible and financially economical as they offer low premiums with high levels of sum assured. It is essential to know term insurance comes under which section of the Income Tax Act for Tax benefits.
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The beneficiary or nominee receives the sum assured as a death benefit at the insured's untimely death under the policy term. If the insured outlives the policy term, there will be no death benefit. However, upon opting for the return of premium option and upon surviving till the end of the policy term, the insured would get all premium amount paid.
Note: Know more about what is term insurance first before reading this article.
Term Plans
To provide tax benefits to people, the Indian Government and the Income Tax department have made tax deduction provisions on the policyholder’s term insurance premium payments. These deductions lower the policyholder’s taxable income, so he/she can save taxes each year till the term plan continues.
Under the term plan, the policyholder can take tax advantages within two sections of the Indian Income Tax Act, 1961:
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As we all know by now that term insurance comes under which section, here is detailed information on tax benefits under these two sections of the Income Tax Act:
Upon availing of a term insurance plan, the customer has to pay a monthly/ yearly/ half-yearly/ quarterly amount as a premium to the insurance company. The premium payments can be deducted from the customer's overall income for an amount of almost Rs. 1.5 lakh in a financial year, but this is applicable only for those who have availed of this policy before 31st March 2012.
People, who got the policy issued after 1st April 2012, will have 10% tax deduction benefits. It results in a reduction in overall taxable income, which is a huge benefit for the policyholder.
Another aspect of tax benefit under section 80C is that it can be availed by both individual and Hindu Undivided families (HUFs). For individuals, the tax deduction can be claimed by the individual, his/her children, or his/her spouse. This is the most common tax deduction under Section 80C of the Income Tax Act, 1961.
Term life insurance policies aim to provide financial support to the beneficiaries at difficult times or in case of an unfortunate incident. In case of the policyholder's demise, the entire amount is given to the beneficiary without any tax deductions under section 10 (10D).
At the end of the term plan with a return of premium, when the policyholder receives the entire amount, it is also exempted from the tax.
The taxpayers can have tax savings under various sections and subsections of the Income Tax law, as- 80C, 80CCD (1B), 80D, and 24 (4). Within his/her Income band, the taxpayer can make maximum investment and save tax. The table below describes the maximum tax benefits one can take under these sections of income tax.
|
Deductions |
Maximum Amount (Rs.) |
|
Standard deduction |
50,000 |
|
Section 80C* |
150,000 |
|
Section 80D |
25,000 |
|
Section 80CCD (1B) NPS |
50,000 |
|
Section 24 (b) |
200,000 |
|
Total |
4,75,000 |
*The total deduction amount under sections 80C, 80CCC and 80CCD (1) in aggregate cannot exceed Rs. 1.5 lakh.
Note: Check out the best term insurance plan in India and choose one that suits your requirements.
˜Top 5 plans based on annualized premium for bookings made on https://www.policybazaar.com in the first 6 months of FY 24-25.
Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
+Rs. 487/month (Rs.16/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 38 years of age.
Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited
We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881
For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale
Policybazaar Insurance Brokers Private Limited | CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana – 122001 | Registration No. 742, Valid till 09/06/2027, License category- Composite Broker Visitors are hereby informed that their information submitted on the website may be shared with insurers. Product information is authentic and solely based on the information received from the insurers.
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+Rs. 820/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 38 years of age.
+Rs. 1,443/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 38 years of age.
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