Life insurance, as most of us know, is a basic necessity that should be addressed in the current scenario. Buying online term insurance is a good way to secure your family’s financial future, should anything unfortunate befall you within the policy period. The money your nominees or beneficiaries will receive will help them stand on their feet in terms of covering monthly expenses, meeting future life goals, and taking care of repaying liabilities, if any.
Term insurance is the purest form of life coverage, offering financial protection in the event of the policyholder’s demise, as mentioned. To buy the right term plan for your needs, you can choose the tenure and coverage amount and then calculate the premium payable, so the policy is within your budget. Along with the benefit of financial safety for the family, there are several tax-related advantages that you stand to get. Therefore, it is one additional reason for investing in life insurance. Read on for more information on the tax benefits offered by term insurance.
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Tax Deductions Under Section 80C
We have already discussed the meaning of term insurance. But what about the tax benefits that this life insurance plan offers? There are sizable tax deductions that you can avail on your term insurance premium payments under Section 80C of the Income Tax Act. You can get deductions up to Rs. 1.5 lakh on your premium payments in a financial year. This applies to premiums paid for yourself, your spouse, and your children. Since a lump sum amount is deducted from your gross total income, Section 80C benefits are highly advantageous for term insurance policyholders.
However, there is just one aspect to keep in mind if your policy has been issued after the 1st of April, 2012. You will get the entire deduction only if the premium does not exceed 10% of the sum assured under the term plan. If it does, then your deductions will be restricted to 10% of the sum assured. Similarly, for policies issued before or on the 31st of March, 2012, if the premium exceeds 20% of the sum assured, the deductions will be restricted to the same amount. Now that you have an idea about the attractive tax deductions on term insurance policies, here’s looking at the exemptions offered by the same.
Tax Exemptions Under Section 10 (10D)
It is not just deductions that you stand to gain with term insurance. Your nominees or beneficiaries will get tax exemptions on the sum assured or death benefit payout by the insurance company. Section 10 (10D) ensures exemptions on this amount. While there are terms and conditions pertaining to income received from policies or maturity proceeds, tax exemption is fully granted for any payout arising from the policyholder’s death.
Did you also know that you can combine health insurance deductions with your life insurance policy? Read on for more below.
Tax Deductions Under Section 80D
Term insurance plans offer the scope of integrating health insurance coverage through the addition of riders like critical illness and others. The best part is that while you get an additional coverage layer for your family, you also enjoy tax deductions on the premium payments under the rider. Section 80D offers deductions up to Rs. 25,000 (for those below 60) and Rs. 50,000 (for those above 60) for health insurance premium payments. This helps you get an extra tax benefit with a term insurance policy.
Hence, tax benefits are a significant reason to avail of term insurance policies that ensure continued life coverage for a comparatively reasonable premium. In addition, you can get deductions under Sections 80C and 80D on premiums paid and exemptions for your nominees under Section 10 (10D) if they receive death benefits from the insurance company within the policy period. Of course, tax benefits aside, you should primarily purchase term insurance to financially protect your family from life’s uncertainties. Knowing that your basics are covered will bring you mental peace and help you lead a stress-free life.