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Term Insurance Tax Benefits

A term insurance plan offers multiple advantages beyond just life cover. One of the most important is the tax benefits of term insurance under the Income Tax Act, 1961. These are:

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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: 16th Oct 2024
Modified on: 16th Oct 2024
Reading Time: 15 Mins
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Tax Benefit Under Section 80C/ 80D

 

Many people ask, “term insurance comes under which section of Income Tax Act,1961?” While the base premium deduction qualifies under Section 80C (in case of old tax regime), health-related riders with term insurance can also give tax deduction under Section 80D (in case of old tax regime).

 

Section 80D usually applies to health insurance premiums. However, if you add riders like Critical Illness Benefit  Rider  or Surgical Care Rider to your term plan, the premium paid for those riders can be claimed under this section.

 

The payout from these riders can help cover medical costs. The premium you pay for such riders is eligible for a tax deduction under Section 80D.

 

Tax Deduction Limits Under Section 80D

 

Covered Individuals

For Self, Spouse & Dependent Children

For Parents

Total Deduction Limit

All insured persons under 60 years of age

₹25,000

₹25,000

₹50,000

If parents are above 60 years of age

₹25,000

₹50,000

₹75,000

If both self and parents are above 60 years of age

₹50,000

₹50,000

₹1,00,000

Keep in mind, only rider premiums related to health are considered under Section 80D (in case of old tax regime). Other riders (like accident benefit riders) do not qualify for this deduction.

 

Tax Benefits on Term Insurance Riders

 

You can improve term insurance plan coverage with health-related riders such as Critical Illness Cover and the premium for such riders can be deducted from taxable income because it is eligible under section 80D (in case of old tax regime). The tax deduction for individuals is up to ₹25,000 and for senior citizens up to ₹50,000, thus you can easily maximise tax savings while increasing health-related protection.

 

How to Choose the Best Term Insurance Plan for Maximum Tax Savings

 

  • Select a term insurance plan amount that is sufficient for the , future needs and  lifestyle of your family. 
  • Make sure annual premium (paid on yearly basis) is within 10% of the sum assured amount in order to claim Section 80C tax benefit (in case of old tax regime). 
  • You may also select health-related riders like Critical Illness Benefit Rider etc  These  riders are available at an additional nominal premium and give added coverage. For more protection and deductions under Section 80D (in case of old tax regime). 
  • Select term insurance plans with a cover period of more than 15-20 Years. The idea is to lock the premiums at a lower rate for 20 to achieve long term cover for future financial needs. 
  • Choose insurers with high claim settlement ratios for reliability and peace of mind.

How to Claim Tax Benefits for Term Insurance

 

For Salaried Individuals:

 

  • Fill and submit Form 12BB to your employer with premium receipts.

  • Declare your planned investments at the beginning of the financial year.

  • Keep payment proofs for reference in case of tax audit.

  • For Self-Employed Individuals:
  • Show your premiums on the ITR form as part of your tax filing obligations.
  • Claim deductions for base premiums under Section 80C and do the same for riders under Section 80D (in case of old tax regime).

Note: You can only claim the actual amount paid, not the full limit. GST paid is also eligible for deduction if applicable.

 

FAQs

 

Q1. What will happen on not paying the premium on time?

 

Your policy may expire after the grace period if you do not pay the premium timely. You will lose not only your coverage, but any tax advantages unless you revive the policy within permitted time frames.

 

Q2. Can I get term insurance tax benefits if I stop paying the premiums?

 

No tax benefits are available only if you are continuing to pay the premium. If you stop, your policy may lapse post the duration of the grace period, and you will lose deduction benefits under Section 80C and 80D.

 

Q3. How can I maximise term insurance tax benefits?

 

Choose an appropriate plan with health-related riders, maintain timely payments of premiums, and keep the premium amount stout within 10% of the sum assured. All of this would put you in a position to claim  benefits under Sections 80C and 80D (in case of old tax regime).

 

Q4. Is term insurance claim taxable?

 

No, money received by the nominee will be tax-free.

 

Q5. How much term insurance can be claimed tax-free?

 

Tax benefit under section 10(10D) has no maximum limit on the death benefit.

 

Q6. Can NRIs claim these tax benefits too?

 

Yes, NRIs can take term insurance tax benefits under sections 80C and 80D (in case of old tax regime) given that a) income is taxable in India b) they purchased the insurance from an insurance company based in India.

 

Q7. How do I calculate my term insurance tax deductions?

 

Add the base premium (eligible under 80C), and health-related rider premiums (eligible under 80D) (in case of old tax regime). Make sure you have limits on your total deductions otherwise you will not be entitled to deductions from your taxable income as prescribed by the Income Tax Act. 

 

Q8. Who is eligible to claim tax benefits on a term insurance premium? 

 

Any individual or a Hindu Undivided Family (HUF) can claim deductions on premiums paid for self, spouse, and children, r, may also claim tax deductions under section 80C and, if applicable, 80D (in case of old tax regime).

 

Bajaj Allianz Life Term Insurance with tax benefit up to Rs 46,800

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Bajaj Allianz Life Term Insurance with tax benefit up to Rs 46,800*
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New Term Plan Launched!

₹1 Cr Term Plan @₹15/ Day^

Get upto16% Discount on 1st Year Premium3

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*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

X
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


Term Insurance Plans from Bajaj Allianz Life

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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

X
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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Disclaimer

%%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

X
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

X
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

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. Bajaj Allianz Life 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

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