Term Insurance is a type of life insurance that offers coverage to the policyholder. However, this coverage is only valid for a particular period. If the policyholder dies during this time frame, then the term insurance-providing company pays the insured money to the beneficiary.
However, one must know a few terms and conditions before taking term insurance. Apart from this, term insurance also has several tax benefits under the sections 80C, 80D, and 10D. In this article, we will learn about these benefits and how to claim them.
According to the Income-tax Act,1961(ITA), several tax benefits are levied on term insurance. People considering term life insurance must learn about these tax benefits and avail of them to make the most out of their insurance policy. These include:
The Income Tax Act of 1961 lists specific fixed eligibility criteria for claiming term insurance tax benefits. Any individual seeking term insurance tax benefits must fulfil the following requirements:
These are some standard eligibility criteria that one must fulfil to claim tax benefits of term insurance under the ITA.
Amongst the three main sections related to the tax benefits of term insurance under the Income Tax Act of 1961, section 80C states that an individual can avail of tax deductions of up to Rs 1.5 lakhs on premiums of term insurance policies. Here are some critical points for availing tax benefits, as in section 80C:
Section 80D allows Hindu Undivided Family (HUF) or individuals to deduct their health insurance premiums from their taxable income. Additionally, certain term plans are eligible for tax benefits under Section 80D. Policyholders who have included a health-related rider (such as Critical Illness, Surgical Care, or Hospital Care Rider) with their term insurance policy can also claim deductions. One of the critical tax benefits of term insurance under Section 80D is:
Section 10(10D) lists the following tax benefits according to the Income Tax Act 1961:
Individuals or Hindu Undivided Family (HUF) can strengthen their insurance policy by specifying a particular illness and, therefore, ensuring some extra amount for it.
The Income Tax Act of 1961 allows a deduction of Rs 25,000 for individuals and Rs 50,000 for senior citizens, according to Section 80D, on the premium paid for these add-ons or riders that are part of the insurance plan.
Here are the points to consider while taking a term insurance plan to gain maximum tax benefits:
Hence, these points can be considered to ensure that you take the best term insurance plan with maximum tax benefits for your future.
Term insurance provides coverage for a specific period, offering tax benefits under sections 80C, 80D, and 10D. Eligibility criteria and certain conditions apply for claiming these benefits. Section 80C allows deductions on premium payments up to Rs 1.5 lakh. Section 10(10D) exempts the nominee from tax on the insurance amount in case of the policyholder's death. Section 80D permits deductions on health-related rider premiums. Choosing the right term insurance plan is crucial for maximizing tax benefits.