What are the Tax Benefits of Term Insurance in India

1. What are the Tax Benefits of Term Insurance in India?

2. When we talk about term insurance tax benefits in India, we discuss the three sections of the Income Tax Act of 1961. • The three sections being - • Section 80C of the Income Tax Act, 1961 • Section 80D of the Income Tax Act, 1961 and • Section 10 (10D) of the Income Tax Act of 1961 • Let us go through them one and one and see what each section means regarding tax benefits on a term insurance plan in India. • Tax benefits under Section 80C • Under Section 80C Act, a taxpayer will be entitled to an exemption of up to INR 1.5 lakhs on the payments made against a term insurance plan in premiums. In addition, the premium paid for your children and spouse towards a term life plan is also eligible or entitled to tax exemptions. However, this tax exemption or tax benefits under 80C for a term plan is only applicable to term plans issued before 31.03.2012.

3. Tax benefits under Section 80D • To be eligible for tax benefits under section 80D of ITA, 1961, the insured must have coverage for critical medical conditions or any other form of illness or a medical condition-related cover in addition to the term insurance plan. • Important facts to keep in mind in relation to under section 80D tax saving are - • Eligibility for tax deductions will only be for amounts not more than INR 25,000. • Eligibility for tax deductions availed for an additional INR 25,000 if the term plan was for your parents. • For senior citizens above 60 years, INR 50,000 is the maximum amount that can be claimed under section 80D of ITA, 1961. • Tax Benefits under Section 10 (10D) Income Tax Act, 1961 • So what is 10D, or is it related to income tax exemption under section 10 (10D)? In the event of the insured's demise, the total assured amount and proceeds to be received by the beneficiary is entirely tax-free. Section 10 (10D) Income Tax Act, 1961 allows for this exemption from all forms of taxes. • However, the total monetary sum that is remunerated on the surrender or maturity of the policy is subject to specific situations and conditions. Those conditions being -

4. If the life insurance policy was issued between the dates 01.04.2003 to 30.03.2012, the payable premium in any given year exceeded 20 percent of the actual sum that was assured. In this scenario, the life insurance policy proceeds will be taxable under Section 10 (10D). • For all life insurance policies that have been issued on or after 01.04.2012, the payable premium limit for any given year is 10 percent of the actual sum assured. So after 01.04.2012, if your premium payable exceeds 10 percent of the sum secured, the proceeds will be taxable under Section 10 (10D). • Conclusion • For a better understanding of the tax exemption works, the benefits that can be availed, or when term insurance comes under 80C, 80D, and 10 (10D), it is always prudent to refer to a financial advisor or Beshak, who can help you make an informed decision. THANK YOU