Term insurance is a pure protection plan that offers coverage against an unfortunate event during the policy term. One of the most significant advantages of a term plan is the tax^ benefit associated with it. Term insurance tax benefits can provide you with increased savings and better earnings. Read on to know more.
Term Insurance Tax Benefits^ under Specific Sections of the IT Act
As mentioned above, there are several term insurance tax benefits^ that you can avail of. Following are a few of them:
- Deductions under Section 80C - The premiums you pay towards your term insurance plan can help you save money in the present as a tax benefit. You can get deductions of up to ₹ 1.5 lakh under Section 80C.
- Benefit under Section 10 (10D) - The tax benefits are also extended to the death benefit given to the nominee. When there is an unfortunate event, the family receives the policy holder’s death benefit or sum assured, which ensures that the family gets the necessary financial protection it requires, without losing out on taxes
- Section 80D - A deduction of up to ₹ 25000^ is also available under Section 80D on premiums paid for term plans with a critical illness cover option
Eligibility criteria to claim tax^ benefit:
Deduction can only be claimed by individuals and a Hindu Undivided Family (HUF) on the premiums being paid for their term plans or on the benefits received by them.
Will I continue to receive tax benefits if I discontinue the term insurance policy?
You must pay the premium to receive term insurance tax^ benefits under Section 80C. The tax benefit applies to the total premium you pay in a financial year. When you stop premium payment, your term plan terminates, and your life cover ceases to exist. Your nominee will no longer receive any financial benefit from your policy. Besides that, you will not be able to claim deductions when you discontinue premium payments.
Do I need to pay GST on term insurance under Section 80C?
GST (Goods and Services Tax) and relevant cesses are levied as per applicable rates on the premium amount.
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^ Tax benefits under the policy are subject to conditions under Section 80C, 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.