Benefits of Term Insurance Under Sections 80C, 80D, and 10(10D)

A life insurance term plan not only provides financial protection for your family but also offers significant tax benefits of term insurance. Under Section 80C, you can claim deductions on premiums paid, reducing your taxable income. If your policy includes a critical illness rider, you may also be eligible for tax savings under Section 80D. Additionally, the death benefit received by your family is tax-free under Section 10(10D). Understanding these provisions helps you plan better, save on taxes, and ensure financial stability. A well-chosen life insurance term plan can offer both security and tax efficiency.

Let's understand how your life insurance term plan can provide substantial tax relief.

Section 80C: The Most Popular Tax-Saving Avenue

Section 80C is the first thing that comes to mind when discussing tax-saving investments. It allows individuals to claim up to INR 1.5 lakh deductions on various eligible investments, including term insurance premiums.

How Does Section 80C Benefit You?

• The premium you pay for your life insurance term plan is deductible from your taxable income.
• You can claim up to INR 1.5 lakh per financial year under this section.
• Other eligible investments under Section 80C include PPF, ELSS, and tax-saving fixed deposits, among others.

Key Considerations

• The premium paid should not exceed 10% of the sum assured (for policies issued on or after April 1, 2012).
• The deduction is available for policies issued before April 1, 2012, if the annual premium is below 20% of the sum assured.

Investing in a life insurance term plan ensures your family's financial well-being and benefits from significant tax savings under Section 80C.

Section 80D: Additional Savings with Health-Related Riders

While Section 80D primarily provides tax benefits on health insurance, it also extends tax savings to specific health-related riders associated with a term insurance plan.

How Does Section 80D Apply to Term Insurance?

If you opt for health-related add-ons such as:

• Critical Illness Rider
• Surgical Care Rider
• Hospital Care Rider

Then, the premium paid to these riders qualifies for tax deductions under Section 80D.

Tax Benefits Available Under Section 80D

• INR 25,000 deduction for premiums paid for self, spouse, and dependent children (if below 60 years).
• INR 50,000 deduction if parents are senior citizens.
• If you and your parents are above 60, you can claim up to INR 1,00,000 in tax deductions.

Only the Critical Illness Rider is eligible for tax deductions under Section 80D, while riders like Surgical Care and Hospital Care may not always qualify.

Adding a critical illness rider to your life insurance term plan will give you enhanced financial protection against severe health conditions and maximise your tax savings.

Section 10(10D): Tax-Free Payouts for Maximum Benefits

One of the most significant advantages of a term insurance plan is the tax-free payout under Section 10(10D). This ensures that the death benefit received by your nominee is entirely exempt from taxes.

How Does Section 10(10D) Benefit You?

• The payout received upon the insured's demise is 100% tax-free.
• There is no upper limit on the amount exempted.
• For policies issued on or after April 1, 2012, the premium should not exceed 10% of the sum assured to keep the maturity proceeds tax-free.

With this benefit, you can rest assured that your family will receive the entire sum without any deductions, ensuring financial stability during tough times.

Tax Benefits on Term Insurance Riders

Adding term insurance riders to your insurance plan enhances coverage and increases tax advantages. Here's how:

• Critical Illness Rider: Eligible for tax deduction under Section 80D.
• Return of Premium Rider: Increases premium payments, maximising savings under Section 80C.

By customising your term plan with suitable riders, you can ensure comprehensive protection while optimising tax benefits.

How to Claim Tax Benefits on Your Term Insurance?

1) For Salaried Individuals

• Use Form 12BB to declare investments.
• Submit premium payment receipts for deduction proof.
• Ensure deductions are reflected in Form 16 issued by your employer.

2) For Self-Employed Individuals

• Declare your term insurance premiums in the ITR form.
• Claim deductions under Sections 80C and 80D based on your eligible premium payments.

Exclusions to Keep in Mind

• Personal accident riders are not eligible for tax benefits under Sections 80C or 80D.
• Medical expenses for treatments are not covered under Section 80D but may be eligible under Section 80DD or 80U for specific ailments.
• Only the actual premium paid qualifies for deductions, not the maximum limit of the section.

Conclusion

A life insurance term plan is more than just an assurance-it's a powerful tax-saving tool. You can protect your family's future while optimising your tax savings by utilising the tax benefits of term insurance under Sections 80C, 80D, and 10(10D).

Whether you want to reduce taxable income, secure health-related coverage, or ensure a tax-free payout for your loved ones, term insurance is a wise investment. So, if you haven't already, now is the perfect time to invest in a life insurance term plan and enjoy the dual benefits of security and tax savings.

Secure your future, save on taxes, and make a wise financial decision today!

*Standard T&C Apply

'Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale. '

**Tax benefits are subject to change in prevalent tax laws.

All savings are provided by the insurer as per the IRDAI approved insurance plan.