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 Income Tax Act, 1961

As mentioned above, there are several term insurance tax benefits^ that you can avail of. Following are a few of them:

  • Tax^ Benefits 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.
  • TaxBenefits 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 policyholder’s death benefit or sum assured, which ensures that the family gets the necessary financial protection it requires, without losing out on taxes.
  • Tax^ Benefits under 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:

A 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.

1. How can I maximise term insurance tax^ benefits?

You can maximise your term insurance tax^ benefits by opting for suitable riders. Riders are optional and can be added to your base plan for an extra premium. You can claim deductions for these premiums paid for your term insurance under Section 80C of The Income Tax Act, 1961, up to a maximum of ₹ 1.5 lakh per annum.

2. What will happen if I do not pay the premium on time?

The insurance company offers a grace period during which you can clear your due premium. However, if you fail to pay the premium during the grace period, your policy will lapse and you will lose your policy benefits.

3. Who is eligible to claim term insurance premium tax benefit?

The policyholder and the nominee can claim the term insurance tax^ benefit under Section 80C, Section 80D, and Section 10(10D) of The Income Tax Act, 1961.

4. 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.

5. Are there any situations when the beneficiary might still have to pay tax?

The death benefit received by the plan’s beneficiary is tax-free^ subject to conditions prescribed under Section 10(10D) of The Income Tax Act, 1961. However, life insurance plans may be taxed in some cases, such as:

1. Benefits received under Section 80DD(3) are taxed

2. Benefits received under a Keyman insurance policy are also taxed

COMP/DOC/Apr/2023/244/2847

6. 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!a 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.

1. How can I maximise term insurance tax^ benefits?

You can maximise your term insurance tax^ benefits by opting for suitable riders. Riders are optional and can be added to your base plan for an extra premium. You can claim deductions for these premiums paid for your term insurance under Section 80C of The Income Tax Act, 1961, up to a maximum of ₹ 1.5 lakh per annum.

2. What will happen if I do not pay the premium on time?

The insurance company offers a grace period during which you can clear your due premium. However, if you fail to pay the premium during the grace period, your policy will lapse and you will lose your policy benefits.

3. Who is eligible to claim term insurance premium tax benefit?

The policyholder and the nominee can claim the term insurance tax^ benefit under Section 80C, Section 80D, and Section 10(10D) of The Income Tax Act, 1961.

4. 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.

5. Are there any situations when the beneficiary might still have to pay tax?

The death benefit received by the plan’s beneficiary is tax-free^ subject to conditions prescribed under Section 10(10D) of The Income Tax Act, 1961. However, life insurance plans may be taxed in some cases, such as:

1. Benefits received under Section 80DD(3) are taxed

2. Benefits received under a Keyman insurance policy are also taxed

COMP/DOC/Apr/2023/244/2847

6. 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!a 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.

COMP/DOC/Jun/2021/176/6055

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^ Tax benefits are subject to conditions under Sections 80C, 80D, 10(10D), 115BAC 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 more details.

!aLife Cover is the benefit payable on the death of the life assured during the policy term.

>1 Day is a working day, counted from the day of receipt of all relevant documents from the claimant, additional information sought by the Company and any clarification received from the claimant. The Company will be calling the claimants for verification of information submitted by the Claimant which will also be considered as part of relevant documents. The working day will be counted as Monday to Friday and excluding national holidays/bank holidays/public holidays.

##Accelerated Critical Illness Benefit (ACI benefit) is up to ₹ 1 crore (Subjected to underwriting guidelines). Accelerated Critical Illness Benefit (ACI Benefit) is optional and available under Life & Health and All in One options. This benefit is payable, on the first occurrence of any of the 34 illnesses covered. Medical documents confirming the diagnosis of critical illness need to be submitted. The benefit is payable only on the fulfilment of the definition of the diagnosed critical illness. The ACI Benefit is accelerated and not an additional benefit, which means the policy will continue with the Death Benefit reduced by the extent of the ACI Benefit paid. The future premiums payable under the policy will reduce proportionately. If ACI Benefit paid is equal to the Death Benefit, the policy will terminate on payment of the ACI Benefit. To know more about the ACI Benefit and terms & conditions governing it, kindly refer to the sales brochure. ACI Benefit and term would be equal to the policy term or 30 years or (75-Age at entry), whichever is lower.

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