Apart from a death benefit in term insurance, you can reduce your tax liability with some deductions under sections 80C, 80D, & 10(10D) of the Income Tax Act 1961.
Towards the start of the financial year, people start planning their investments and setting financial goals for themselves. It is equally important to other tasks. What if I told you you could also use a term plan to enjoy tax benefits? Isn’t it pleasing?
Nowadays, people buy a term insurance plan to assist them claim deductions below sections 80C and 80D of the Income Tax Act 1961. Keep studying to research more about period coverage’s tax benefits.
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Term Insurance Tax Benefits Under Various Income Tax Sections
With your time period insurance policy, you may maximize your tax savings under the numerous sections of the Income Tax Act 1961. Typically, term insurance tax benefits are claimed beneath the subsequent sections of the Income Tax.
Term Insurance Tax Benefit under Section 80C
Section 80C of the Income Tax Act is the most famous tax benefit among policyholders. It allows them to get a tax deduction of as much as ₹1. Five lakhs every year for the charges paid within the course of the term plan. It offers a tax exemption for all the cited investments, inclusive of PPF, EPF, ULIP, and ELSS, and payments of domestic loans, children’s education costs, way-of-life insurance expenses, and plenty of others.
Who can claim a Section 80C deduction?
To declare the term coverage tax advantage beneath section 80C, one must have a minimal policy-keeping period of 2 years. The following people can claim the deductions:
- Individuals
- Hindu undivided families(HUFs)
Maximum Deduction Under Section 80C
Taxpayers can opt for a maximum tax deduction of up to ₹1.5 lakhs annually for the premium paid towards the term insurance plan. Organizations, startup firms, and LLPs cannot benefit from this deduction.
Consider the following conditions before availing of tax benefits under section 80C
- Annual premiums paid towards the term insurance plan should be at most 10% of the life cover.
- Only the set percentage amount is applicable for deduction under section 80C. If it goes above 10%, then the remaining amount cannot be redeemed for the same.
- In the term policy issued before 31st March 2012, one can avail of the deduction if the annual premium does not exceed 20% of the life cover.
- Under section 80C, if a term policy is surrendered or terminated within two years from the inception, one cannot avail of tax exemption on premium payments.
Term Insurance Tax Benefits Under Section 80D
Section 80D of the Income Tax Act offers tax blessings on medical insurance and term coverage plans with health riders. Policyholders can claim a tax exemption for rates paid closer to fitness riders within the financial 12 months. For instance, a important or terminal infection rider will make you eligible for tax exemption below Section 80D.
Who can claim a Section 80D deduction?
To claim the tax exemption under section 80D, one should be:
- Individual
- Hindu undivided family(HUFs)
Maximum Deduction Under Section 80D
One can claim a tax exemption under Section 80D for the payments mentioned below-
- Taxpayers can opt for a maximum tax deduction of up to ₹25,000 annually for premiums paid towards health riders in the financial year. Whether you buy a term insurance plan for yourself, your spouse, dependent children, or parents.
- If your family or dependents’ ages exceed 60 years, you can avail of tax benefits of up to ₹50,000.
Consider the following conditions before availing of tax benefits under section 80D
- Premium paid on behalf of working children (25 years old) cannot be taken for tax benefit.
- Premium paid by credit card or online mode other than cash is allowed for deduction.
- The tax exemption must be taken without adding the service tax and cess portion from the premium amount.
Term Insurance Tax Benefit under Section 10 (10D)
One can also avail the tax gain on the demise and adulthood gain given to the nominee. Under phase 10 (10D) you may ensure your dependents can experience a death gain quantity you go away for them without any tax deduction. When the premium paid on the term insurance plan does not exceed 10% of the sum assured, the death or maturity benefits of the coverage are fully tax-unfastened.
Consider the following conditions before availing of tax benefits under section 10 (10D)
- The premiums cannot exceed 10% of the life cover for term insurance policies issued on or after April 1, 2012.
- When the payout exceeds ₹1,00,000, and you have a PAN card, they’ll take 1% as tax before giving the payout.
- There is no limitation on the maximum value of the demand for life cover.
How PolicyX Can Help You?
PolicyX is among India’s top insurance aggregators certified by IRDAI. Their insurance experts are always pleased to assist you in finding the proper protection plan and solve any queries.
They provide 24/7 assistance to meet the needs of existing or prospective customers. With their services like free-of-cost policy comparison with experts, helpdesk service, best advice from advisors, dedicated claims support & guidance, etc.
So why waste your time when you can make one phone call to get yourself the best deal without any hassle? To contact our customer representative, click on here and get assistance in no time.
Conclusion
Hopefully, now you know the term insurance tax benefits under Sections 80C and 80D. While buying a term plan, you must understand the tax implications to allow you to plan your finances better. As they say, knowledge is power! For further assistance, you can even reach out to their insurance experts through the PolicyX.com website
