Term Insurance Tax Benefit – Deductions, Exemptions & Rules

Key Insights 

1. Use Sections 80C and 10(10D) to save more on taxes. Claim deductions with Section 80C and make sure your payout stays tax-free with 10(10D).

2. Check that your premium is less than 10% of the sum assured and keep your policy for at least two years to meet the main eligibility rules.

3. If you are salaried, use Form 12BB to claim your tax benefits. If you are self-employed, file your ITR to get these benefits.

 You can protect your family's future and lower your taxes at the same time. Find out which term insurance tax benefit under which section gives you term insurance tax benefits, with special information for term insurance tax benefit for senior citizens.

The tax benefit for term insurance is a way the government encourages smart financial planning. You can deduct your yearly premiums, which means some of your payment is term insurance premium tax-free. This makes your insurance not just protection, but also a way to save on taxes.

Example:

I pay ₹35,000 each year for my term insurance premium. Thanks to Section 80C, I can claim this full amount as a tax deduction. This lowers my taxable income and saves me ₹10,500 every year at the 30% tax rate. It also helps protect my family's financial future.

What are the tax benefits of term insurance under different sections of the Income Tax Act?

You can save more with each premium you pay tax benefit for term insurance. Your term insurance policy can also help you get valuable tax benefits under several sections of the Income Tax Act.

Here is the table that shows you the tax benefits of the term insurance:
 

Use Sections 80C and 10(10D) to save more on taxes and make sure your family has strong financial protection.

Bonus Tip: Payments or deposits made under a scheme from LIC, another insurer, UTI, or a company approved by the Board can be used for the care of a dependent person with a disability.

Eligibility to Claim Term Insurance Tax Benefits

You can save a lot on taxes by claiming your term insurance benefits but is term insurance premium tax free? Just make sure you meet the required eligibility criteria.

• To get term insurance tax benefits in India, you must be an Indian citizen or part of a Hindu Undivided Family (HUF).
• Indian residents whose income is taxable can claim a deduction for term insurance tax benefits.
• Section 80C of the Income Tax Act allows senior citizens aged 60 and above, whose income is taxable, to get tax deductions on term life insurance.
• To claim deductions under the Income Tax Act, an Indian citizen must have a term insurance policy in their own name, or in the name of their spouse or children.

If you want to maximise your tax benefits from tax benefits on term insurance, check that you meet the rules for residency and ownership, and that your premium and sum assured are balanced correctly.

Steps to Claim Tax Benefits for Term Insurance

You can save money on your premiums by claiming tax benefits on your term insurance. Here are a few easy steps to help you get started, which cleafy is term insurance premium tax free or not.

Salaried Individual

• If you are a salaried employee, you can claim tax deductions for term insurance premiums under Section 80C and for critical illness riders under Section 80D. To claim these, declare your investments and tax-related expenses by filling out Form 12BB. 

• Submitting this form lets you receive the tax deduction and reduces your overall tax burden. Try to submit Form 12BB at the beginning of the financial year so your eligible deductions appear in your Form 16.

• Keep the receipts and certificates for the premiums you have paid. Submitting Form 12BB is enough to claim the benefit, but it’s a good idea to save these documents in case you need them later or if the IT department asks for proof of your investment.

Self-Employed Individuals

• If you are self-employed, you can get tax relief on your term life insurance by filing your Income Tax Return. Make sure to declare your term insurance and health insurance premium payments for the year under Section 80C and Section 80D in the ITR form.

• You can also claim deductions for premiums paid on critical illness riders in your term plan, up to ₹25,000. Only claim the amount you actually paid. 

• For example, if you paid ₹10,000 for a critical illness rider, you can claim ₹10,000, not the full ₹50,000. Recent changes to GST have lowered the rates on term insurance premiums, making it easier to claim tax benefits and keep your insurance costs lower.

• You can get the full tax benefits from your term insurance, first declare it in Form 12BB. After that, file your ITR with care.

Conclusion

Term insurance gives you two main benefits: strong financial protection for your family and tax savings. If you use Sections 80C and 10(10D) wisely, meet the eligibility rules like the premium-to-sum assured ratio, and follow the right claim steps, you can boost your financial security and lower your tax bill.

FAQs

Planning to buy Term Insurance, will I get an exemption for the same? 

Yes, you might qualify for tax exemptions on premiums paid for term insurance plans under Section 80C of the Income Tax Act, 1961.

When to buy a policy? 

It's best to buy an insurance policy as early as you can, ideally in your 20s or early 30s. This helps you get lower premiums and better coverage because you are likely healthier. Major life events like getting married, having children, buying a home, or taking out a loan are also good times to consider insurance. 

Can we claim term insurance in the ITR? 

You can claim tax benefits for term insurance when filing your Income Tax Return (ITR). These benefits apply to both the premiums you pay and the benefits you receive, as outlined in certain sections of the Indian Income Tax Act, 1961.

Can a term insurance premium be claimed as a tax exemption under Section 80D?  

Yes, term insurance is eligible for tax benefits under Section 80D. You can claim up to 25,000 in premiums if you are under 60 years old, and up to 50,000 if you are over 60. The total benefit can go up to 75,000, depending on the situation.

How much term insurance can be claimed tax-free?

If the policyholder passes away unexpectedly, the full insurance payout can be claimed without any tax.
 

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