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How to Save Tax with a Life Insurance Savings Plan?

Life insurance savings plans, like endowment and money-back plans, help you enjoy the dual benefits of savings and insurance protection. Plus, there’s another added benefit of tax savings. These savings plans can help you lower your tax liability and enhance your disposable income. But before we understand the tax benefits of life insurance savings plans, let’s understand the plans in general.

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 31st March 2025
Modified on: 1st April 2025
Reading Time: 14 Mins
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What are life insurance savings plans?

 

As mentioned earlier, life insurance savings plans are savings-oriented insurance plans which help to create a corpus for your financial goals. Moreover, these plans provide financial security in the form of life insurance protection. If the insured person dies during the policy term, a death benefit is paid, which can provide the family with much-needed financial assistance.

Usually, endowment plans and money-back plans are referred to as life insurance savings plans. Let’s understand their tax implications.

 

What are the tax benefits available with life insurance savings plans?

 

Life insurance savings plans offer multiple tax benefits, which are discussed below –

 

Tax benefit on the premium paid

 

The premium paid for a life insurance savings policy qualifies as a deduction under Section 80C1(incase of old tax regime). You can claim a maximum deduction of ₹1.51 lakhs subject to the fulfilment of the following criteria –

  • If the policy was issued on or before 31st March 2012, premiums up to 20% of the sum assured can be considered as a deduction1.
  • For policies issued on or after 1st April 2012, premiums up to 10% of the sum assured qualify as a deduction1.
  • For policies issued on or after 1st April 2013 for policyholders suffering from a disease of disability as defined under Section 80DDB or 80U, premiums up to 15% of the capital sum assured qualify as a deduction1.

 

Tax benefit on the benefits received

 

The benefits received from the savings plans, including bonuses, guaranteed additions, etc., also qualify for tax exemption. Here are the benefits that you get –

  • The death benefit received is completely tax-free, without limits2
  • For policies issued on or before 31st March 2023, the maturity benefit received will be fully tax-free under Section 10(10D) if it fulfils the premium criterion3
  • For policies issued on or after 1st April 2023, the maturity benefit will be tax-free if the aggregate premium for all traditional life insurance plans is up to ₹5 lakhs in a financial year3 and the policy is compliant with Section 10(10D).

 

How to save tax with savings plans?

 

Now that you know the tax benefits of savings plans, here are some tips that can help you save tax –

 

  • Choose the right policy

    When buying a savings plan, choose a policy that matches your coverage needs and financial goals. This will help you get the corpus when you need it the most.
  • Opt for add-ons for wider protection

    Savings plans offer optional coverage features called riders which come at a nominal additional premium. These riders add to the scope of the policy and provide additional benefits in emergencies.

    Explore the available riders and choose suitable ones to enjoy comprehensive protection. Moreover, if you choose the critical illness benefit rider, you can enjoy an added tax deduction under Section 80D of the Income Tax Act4 (incase of old tax regime).

  • Choose adequate sum assured

    The sum assured of the policy should be adequate to provide you with the corpus needed for the financial goal for which you bought the policy. A low sum assured would not fulfil the purpose of the saving. Plus, in the case of unfortunate demise, an inadequate sum assured would not provide your family the financial assistance that they need.

    Having optimal sum assured would also mean higher premiums, which would help you claim a maximum deduction under Section 80C (incase of old tax regime). So, it’s a win-win in all situations.

  • Choose the right premium payment frequency

    Many life insurance savings plans allow you to pay the premium in a single instalment (single pay) , a limited tenure (limited pay) or throughout the policy term (regular pay). Choose a payment mode that aligns with your budget and financial planning. This will help you enjoy the coverage and tax benefits of the savings plan without any financial pinch.


Conclusion

 

Life insurance plans cover the risk of premature demise and provide financial security. Plus, when you choose savings plans, you get the added benefit of creating a savings corpus for your financial goals. So, assess your goals, quantify them and buy suitable savings plans to create a corpus for their fulfilment.

While the savings plans would help you save up for your financial goals, the tax benefits offered would also help you lower your tax liability. Reduced tax liability means enhanced disposable income, which you can use for additional savings.

So, understand the tax benefits of life insurance savings plans and utilise the tips mentioned above to maximise the tax-saving potential of these plans.

 

 

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    Disclaimers:
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    The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale. Bajaj Allianz t Insurance Company Ltd., Regd. office Address: Bajaj Allianz House, Airport Road, Yerawada, Pune - 411006, Reg. No.: 116, CIN: U66010PN2001PLC015959, Call us on toll free No.: 1800 209 7272, Mail us: customercare@bajajallianz.co.in

    Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility

    BJAZ-WEB-EC-13571/25

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    Disclaimer

    *Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

    ~Individual Death Claim Settlement Ratio for FY 2023-2024

    1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


    Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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    Terms & Conditions

    I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

     

    Please refer to BALIC Privacy Policy

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    %%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

    ##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

    @Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

    ^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
    Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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    Disclaimer

    Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

    *Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

    ~Individual Death Claim Settlement Ratio for FY 2023-2024

    1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


    Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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    Disclaimer

    *Above illustration is for Bajaj Allianz Life eTouch II - A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN:116N198V01) considering Male aged 25years | Non-Smoker | Policy Term(PT)– 30 years | Premium Payment Term (PPT)– 30 years | Sum Assured opted is Rs.1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 5,092. 2nd Year onwards premium Rs. 5,520. Total Premium Rs. 1,65,172 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage: 40, Income Payout Percentage: 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

    ##Tax benefits as per prevailing Section 10(10D) and Section 80C (under old tax regime) of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

    **5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency on first year's premium.

    $Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

    ^^The Return of Premium means total of all the premiums paid under the base product, excluding any extra premium and taxes, if collected explicitly.

    Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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    Terms & Conditions

    I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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