Can Term Insurance Be Claimed Under 80c
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The primary purpose of taking a term insurance policy is to provide financial security for your dependents. The coverage amount can be customized according to your risk and requirements, based on which the premiums are fixed, that can be paid monthly or annually. In case of any unfortunate events to yourself, such as death, accident, disability, etc., the coverage amount or sum assured is paid by the insurance provider as a lump sum amount to the family members.
To encourage the purchase of insurance plans among all, the Income-tax department of India has made provisions for insurance policyholders to avail income tax benefits over premiums paid and amount receivable on maturity.
Section 80C Deduction On Payment Of Term Insurance Premium
Tax benefits on total income can be availed under section 80C of the Income Tax Act 1961 for payments paid towards the premium of an insurance policy. The exemption limit of up to Rs. 1.5 lakhs per annum can be utilized by the policyholder, subject to the below conditions:
- The premiums paid for insurance policies taken in the name of the individual, his/ her spouse, and their children are only eligible for deduction under this section.
- The premium paid should not exceed 10% of the term plan’s sum assured, in case of policies issued after April 1, 2012. For policies issued before April 1, 2012, the premium should not be more than 20% of the plan’s sum assured. If the policy was purchased on or after April 1, 2013, and the policyholder suffers from any disability or disease, then the premium paid should not exceed 15% of the sum assured.
- The total exemption limit under section 80C is Rs 1.5 lakhs and investments made in tax saving schemes, PF, housing loan repayment, health insurance premiums, etc., also fall under the same category. Therefore, your term insurance premiums should be considered along with the other products mentioned above to calculate term plan deduction in income tax from your total income.
Conclusion
Term insurance must be taken after considering the benefits that it offers to yourself and your family members, as that is of utmost importance. The term insurance premium tax benefit and maturity amount benefits that are available on these plans are just a bonus for your future investment. So do not buy a term plan purely to save income tax only.
Also read: How To Change The Nominee On A Term Insurance Policy
