Understanding Term Insurance Tax Benefits For Women In India

What is term life insurance for women?

Term insurance for women is a life insurance plan designed to ensure financial security , through the sum assured to the nominees upon untimely demise of the life assured within the policy term. Offering wholesome financial protection, thus the term life insurance for women may be of benefit, whether you are a wife safeguarding the spouse’s future or a single woman securing the future of your dependent parents or children. These plans offer tax benefits, optional riders which are available at an additional nominal premium covering critical diseases as mentioned in the rider . This depends on insurers terms and conditions.

Importance of tax planning for women and how term insurance fits into that plan?

As recorded by the Periodic Labour Force Survey (PLFS) by the Ministry of Statistics and Programme Implementation, the Worker Population Ratio (WPR) for women marked a notable 40.3% in 2023-24. The increasing percentage of working women calls for efficient tax planning. Here, wise financial choices may help them save on taxes through deductions, which in turn can add up to significant savings for the family. So how does term insurance fit into that plan?

A term insurance comes with tax benefits that allow the policyholder to claim deductions in the taxable income. The term plan tax benefits for women thus may not just help in reducing the taxes payable, but in contributing to family savings too, making it a worthy financial tool.

Term insurance tax benefits for Women

Understanding the tax benefits of buying a term plan for women may give you better clarity on how it can align with efficient financial planning. This may give you ample scope to compare a term insurance for women with other tax-saving choices.

 

So, what are the tax benefits of term insurance for women?

The term insurance for women can reduce the taxable income under the provisions of the Income Tax Act 1961. Here’s a detailed view.

Under section 80C:

Deductions are available for an annual premium payment of up to Rs 1.5 lakhs under section 80C (in case of old tax regime).

Under section 80D:

For premiums paid towards a term plan with a critical illness rider, an additional deduction of up to Rs 25,000 a year can be claimed for self, spouse, and children under section 80D (in case of old tax regime).

Under section 10(10D):

The nominee is entitled to get the sum assured as a death benefit if the life assured dies within the policy term. This payout is completely tax-free under section 10(10D).

Life Insurance For Women & Tax Benefits That Come With It

Change in lifestyle has led to women becoming prone to certain critical diseases like cancer etc . Also, there can be situations of permanent disability due to an accident or a disease. Catering to these medical needs, term insurance for women allows to add riders such as the critical illness rider . Choosing them can make way for additional term insurance tax benefits for women through deductions under sections 80D and 80DDB (in case of old tax regime).

How to choose the right term insurance for maximum tax benefits

There is no single solution that can be termed as the right term life insurance for everyone. Likewise, every woman has specific needs that should be reflected in her choice of term plan. On the same lines, there are various scopes of tax savings under the provisions of the Income Tax Act 1961. It may be worthy to keep them in mind to maximise the tax benefits of the term plan for women.

Here’s an overview of how to go about it.

Tax planning strategy for women

Following are some tips that might aid in effectively using a term plan as a tax planning tool.

• Aligning the sum assured to your financial needs and goals may help as the death benefit is tax-free.
  
• Choose a term plan that aligns with your current and future financial goals. Picking riders wisely may enhance the scope of deductions.
  
• Having a longer tenure for the term plan may result in higher tax savings and more efficient financial management.
  

How to claim tax benefits on term insurance for women

To reap the most of term insurance tax benefits, one needs a clarity of the provisions of the Income Tax Act 1961 under its different sections. Tax benefits of a term plan for women can be claimed under sections 80C, 80D, 80DDB, and 10(10D) (in case of old tax regime). But to claim all possible deductions and exemptions, you may need proper awareness regarding the conditions specified by those sections and subsections.

Eligibility criteria for tax benefits:

• Provisions of sections 80C, 80D, and 80DDB can be availed through tax calculations under the old tax regime.
  
• Under section 80C, the premium paid should not be higher than 10% of the sum assured (if policy is issued post 1 April 2012).
  
• No tax benefit against premium payment is available if there’s a surrender or termination of policy within two years of issuance.
  
• Section 80D deductions are available on a per annum basis for critical illness or other health-related riders (in case of old tax regime).
  
• Additional deductions under section 80D can be claimed for the parent’s insurance policy for up to Rs 25,000 a year if he/she is under 60 and up to Rs 50,000 for senior citizen parents(in case of old tax regime).
  

Conclusion

Efficient availing of the term plan tax benefits for women may thus help gain a stronger financial foothold. Not just for the woman, but for her family too.

FAQs

a. Can I use term insurance as a tax-saving instrument along with other investments?

Yes, you can use term insurance as a tax-saving instrument alongside other investments as long as you fulfil the necessary criteria.

b. Which payments are eligible for Tax Deductions on Term Insurance for Women ?

Premium payments, medical expenses, and the death benefit payout are eligible for tax deductions subject to sections of the Income Tax Act 1961.

c. Is the death benefit of a term insurance policy taxable?

No, the death benefit of a term insurance policy is tax-free.

d. How to maximise term insurance tax benefits for women?

The premium paid towards a term life insurance plan is eligible for a deduction according to Section 80C (under old tax regime) of The Income Tax Act, 1961. You can claim a deduction up to ₹ 1.5 lakh per annum.

e. Who is eligible to claim tax benefits on term plans for women?

The premiums paid towards a term insurance plan are subject to tax deductions under section 80C of the Income Tax Act. In addition, the death benefit in case of the demise of the life assured within the policy tenure are also tax free under section 10(10D) of the Income Tax Act.

f. What other insurance-related tax benefits are available to women?

Deductions for critical illness treatment and parent’s insurance are available as insurance-related tax benefits to women (in case of old tax regime).

g. Is there a maximum limit for tax deductions on term insurance premiums?

Yes, deductions can be claimed for annual premium payments up to Rs 1.5 lakhs and an additional Rs 25,000 towards health-related riders (in case of old tax regime).