Buying a term insurance plan in India lets you avail of a high sum assured at a low rate of premiums. It not only helps ensure your family’s financial future in the event of your untimely death but also lets you enjoy certain tax benefits along the way. This page covers the term insurance tax benefits available in India and how you can enjoy such benefits to the fullest.
Types of term insurance tax benefits available in India
If you were to die within the cover period of the term insurance plan, the insurer would have paid your beneficiary a death benefit, which is the pre-determined sum assured amount. On top of such financial security for your family and peace of mind, it can also be utilised in a way to help you save taxes. Following are the term insurance tax benefits as per the Income Tax Act 1961, that you can avail of in India;
Term insurance tax benefit under Section 80C
Under Section 80C of the Income Tax Act 1961, the premiums paid against the term insurance plan are allowed to be claimed as tax deductibles from your total taxable income. The upper limit of such deduction is INR 1.5 lakhs and the conditions to be met for this to be applicable are;
- For term plans purchased on or after April 1st, 2012, the tax benefit can only be claimed for the premium total amounting to a maximum of 10 per cent of the sum assured.
- In case of termination or voluntary surrender of the policy within 2 years of its initiation, it will no longer be valid for tax deductions and the benefits availed will be reversed.
Term insurance tax benefit under Section 80D
Under the Income Tax Act of 1961, premiums paid for riders like the Critical Illness Rider, in addition to the base plan, are tax-deductible from your taxable income. The deduction limit is INR 25,000 for individuals below 60 years and INR 50,000 for senior citizens. For deductions under Section 80D, you can pay premiums for yourself, your spouse, and dependent children.
Term insurance tax benefit under Section 10(10D)
This term insurance tax benefit is applicable in case of death or maturity benefit (if any) received under the term plan. In the case of the death benefit, the amount received by the nominee stays exempt from tax, irrespective of whether it fulfils the conditions under Section 10(10D) or not. But, in case of maturity benefit, the amount received from the plan will be taxable if it fails to fulfil the conditions under Section 10(10D). In order to claim tax benefits under Section 10(10D) on maturity, the premium payable should not cross the threshold of 10 per cent of the sum assured for plans issued after 31st March 2012.
What is the term insurance age limit?
Alongside learning about the various term insurance tax benefits available in India, it is crucial to understand the term insurance age limit. By doing so, you can enjoy such tax benefits in the best way possible. Buying term insurance early in your young adult life is a wise choice for reasons like;
- You will be able to get optimum coverage given you have good health.
- You will be able to go for a high sum assured at reasonable premium rates.
- You will be able to aim for adequate financial stability and security for your loved ones from early on in these unpredictable times.
Now, knowing the term insurance age limit will help you make avail of the applicable term benefits to the fullest. The earlier you invest in a term plan, the earlier you can start enjoying certain tax relaxations. In India, the minimum entry age for term insurance is 18 years and the maximum entry age for the same is usually 60 or 65 years. So, the earlier you invest in such a plan, the earlier you can ensure financial security for your family and enjoy tax benefits. Generally, as you approach your elder years, your health starts to decline. With a term insurance cover, if you meet your tragic demise within the cover tenure, your loved ones will be able to enjoy death benefits, which stay tax-exempt.
Conclusion
Here are the essential details on term insurance tax benefits as per Sections 80C, 80D, and 10(10D) of the Income Tax Act, 1961. The clearer your knowledge of the applicable benefits, applicable conditions, and term insurance age limit, the better you will be able to make use of this feature.