Is Term Insurance Premium Tax Exempt
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Term insurance plans are of great help when it comes to individuals who are looking to save on tax. Any policy holder of a term insurance is eligible to receive tax benefits as per the Income Tax Act 1961. Typically, all term insurance policies offer customers tax deductions under Section 80C of the Income Tax Act, 1961, along with further deductions up to an amount of Rs 1.5 lakhs every year. Policyholders can also avail of exemptions under Section 10(10)D for receiving any amount as part of maturity benefits from their insurance policy.
Let us take an in-depth look at the term insurance tax benefits.
Deductions and Tax Benefits Under Section 80C
The following are the tax benefits that policyholders can claim under Section 80C
- Individual assessees as well as HUFs (Hindu Undivided Families) are eligible for tax deductions under this section. For individual assessees, the following persons are eligible to receive tax benefits
- The individual himself
The individual assessee’s children - Tax Benefit under Section 80D
Although Section 80D is mainly for health insurance plans, benefits can be availed by some term plans as well. Deductions can be availed in case Hospital Care, Surgical Care, and Critical Illness riders have been opted by policyholders. The main conditions to avail tax benefits under this section are mentioned below:
- Tax benefits of up to Rs.50,000 can be availed in case the policyholder’s parents are above the age of 60.
- Tax benefits of up to Rs.25,000 can be availed in case you have purchased the policy under the name of your parents.
- Tax benefits can be availed if the amount is not more than Rs.25,000.
Tax Benefits Under Section 10 (10D)
The main conditions that must be met in order to avail tax benefits under Section 10 (10D) are given below:
- In case the payout is more than Rs.1 lakh and the PAN of the policyholder is present with the insurance company, 1% TDS is applicable.
- The sum assured must be 10 times the total premium or 10% lesser than the total premium to avail tax benefits.
- In case any bonuses are received because of the policyholder’s death, if the policy has been surrendered, or any sum assured has been received when the policy has matured
Conclusion
Under term insurance plans, several tax benefits can be claimed by the policyholder or his/her family/nominee. Certain tax benefits can be claimed in case riders have been added to the policy as well.
