You must purchase a term plan to protect your family’s financial future in the case of your untimely passing away. But you do receive tax benefits for purchasing term insurance. Therefore, term plans assist you in tax savings. They are an excellent instrument in that sense, but you should know under which part of the Income Tax Act the benefits of term insurance fall.

The advantages you get under Section 80C

Does Section 80C apply to term insurance? It does, without a doubt. Based on Section 80C of the Income Tax Act of 1961, you are eligible for a maximum tax exemption of 1.5 lakh rupees per year for both your term insurance policy and life insurance plans. (Calculate the amount of premium you have paid using the term insurance calculator.) Only you or your spouse, your dependent children, are eligible to get this benefit. There are a few provisions that must be remembered in this situation, like if your term insurance has been granted since April 1, 2012.

In that case, the tax deduction would only be valid if the total cost of premiums did not exceed 10% of the sum assured that the insurance promised. If your term plan were issued before or on March 31, 2012, the tax deduction would only be available if the entire cost of premiums was at most 20% of the sum assured that the policy offered. Hence, keep this in mind while considering term insurance tax benefits. Do you have a medical condition or a disability? The tax deduction will only apply if the premiums you have already paid are at most 15% of the sum guaranteed.

The advantages you have under Section 10 (10D)

According to Section 10 (10D) of the Income Tax Act of 1961, the tax benefit you receive from your term insurance is largely an exemption benefit. According to this specific clause, whatever money you get as a death benefit is excluded from income tax. This benefit also applies to your maturity benefit from a life insurance plan. It also includes any bonuses you might be eligible for in such circumstances.

It also doesn’t matter if you acquire the money from India or another nation. So, there is no question that this is a significant term insurance tax benefit. You must be aware that there are some limitations in this situation nevertheless. This specific benefit would not be available if you received the money under Section 80DDA (3) or 80DD (3). Your policy’s death benefit would not be eligible for the benefit if it were not issued between April 1 2003, and March 31 2012.

The advantages you receive under Section 80D

Does term insurance fall under 80C or 80D tax laws? Well, as you can see, both sections work to your advantage. According to Section 80D of the Income Tax Act of 1961, you are entitled to tax benefits on the health insurance premiums you pay. So, you can receive the tax advantages that apply in this situation if your term policy includes provisions for things like critical illness coverage, hospital care coverage, and surgical care coverage.

Please remember that only specific entities, including you, your spouse, your parents, and any dependent children, are eligible to get the term insurance tax benefit 80D. Whether your parents are financially dependent on you or not is irrelevant in the case of parents. The most you can deduct from your taxes in this situation is 25,000 rupees. The maximum would remain the same even if you purchased the term planin your parent’s name.

The refund information in the term policies’ free-look periods

The Insurance Regulatory and Development Authority (IRDA) constantly works to develop and control the industry to benefit consumers and businesses. The term insurance tax benefit we discussed here only improves this situation.

One of these advantages is the free-look period. This clause specifies that if you are dissatisfied with the terms and circumstances of a term insurance policy, you may always return it within a specific time frame. During this period, you should cross-check the amount of premium to be paid using the term insurance calculator.

In this scenario, the insurance would reimburse you after making the required deductions. The Section 80C tax benefit for term plans enables you to save up to 1.5 lakh rupees annually. You can save 25,000 rupees on premiums and an additional 25,000 rupees on the insurance coverage you purchased for your parent’s thanks to Section 80D. If your parents are elderly, the amount will increase to 50,000 rupees.

There are 2 tax regimes in India – new and old. Choose the correct one after consulting an expert to get the tax benefit you desire. You can opt for a regime change during the next financial year.

Visit the official website of IRDAI for further details.

All savings are provided by the insurer per the IRDAI-approved insurance plan. Standard T&C apply.