Make the Most of Your Term Insurance Plan with Its Tax Benefits

Saving money is an important part of everyone's life. Every individual seeks ways to lower tax responsibility, especially when it comes to saving money. You might also get tax-saving benefits by purchasing term insurance in addition to life coverage. Various term insurance tax benefits are covered under different sections of the Income Tax Act of 1961. Let us learn about these Sections in detail.

Term Insurance Tax Benefits 

The 3 main term insurance tax benefits are described below.

1. Tax Benefits Under Section 80C

Section 80C of the Income Tax Act of 1961 covers the most basic term insurance tax benefits available to every Indian taxpayer. In fact, many individuals consider this section to be the most popular way to save money on taxes. Tax benefits of up to Rs. 1.5 Lakhs are available under this section for premiums paid to purchase the plans. By purchasing a comprehensive life insurance policy for yourself, you may optimise the tax benefits of term life insurance and help your family members in the long run. Furthermore, under Section 80C(5), the insured will not get any Section 80C tax benefits if the policy is voluntarily surrendered or cancelled within two years.

Also read - Should I Purchase Term Insurance Even If I Don't Have Any Dependents?

2. Tax Benefits Under Section 80D

Section 80D primarily allows for tax deductions on health insurance premiums. It does, however, give term insurance tax benefits, albeit in a roundabout way. If you have chosen health-related riders such as Critical Illness cover, Surgical Care cover etc., you can take advantage of the term insurance tax benefit under section 80D. In other words, by adding these riders to your term insurance premiums, you can save money on taxes while simultaneously gaining health insurance coverage. This tax benefit is available to the insured, their spouse, dependent children, and parents in the case of individual term insurance coverage with a critical illness cover. 

3. Tax Benefits Under Section 10(10D)

Aside from the term insurance tax benefits, the life assured and his/her family members might save money by taking advantage of tax exemptions. This is described in Section 10(10D) of the Act. In general, there is no upper limit to the tax benefits of term insurance. It means that the death benefit paid to you or your loved ones under the term plan is tax-free. However, it must be noted that the Section 10(10D) tax benefits are subject to specific restrictions. The exemption is only available if the annual premium does not exceed 10% of the total sum assured if the policy is issued after April 1, 2012.

Take Away

Although there are numerous financial advantages to term insurance, saving money on taxes should not be the primary goal. Term insurance is a must-have for safeguarding your family's financial future. Moreover, if you purchase a term insurance policy at a young age, you can get a lot of coverage for a low price.

You may also like to read - Health Insurance Plans V/S Term Insurance Plans

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.