We all plan to have our investments in good shape so that we can use all of them to support the dreams of our loved ones. One of the top investment options these days that can give your family a high return is term insurance. The best thing about term insurance is that it will support your family even when you are not around. Once you buy a term insurance plan, you have to pay premiums every month, half-yearly, or even annually. In case of your demise within the tenure of the term insurance, your family will be able to claim the sum assured by the insurance company under the plan.
There are several benefits of taking a term insurance plan, apart from the primary benefit of the sum assured that you have taken the term plan for. Although the sum assured of the term insurance plan can only be claimed once you pass away within the term period but while you are alive, you can enjoy some of the term insurance tax benefits. So let us understand the ways through which a term insurance plan can help you save money.
How can Term Insurance help you to Save Taxes?
The main reason for getting a term insurance policy is to provide your family, especially the dependent members with financial security. You can get the flexibility to customize the coverage amount as per your needs, on the basis of which the premiums will be fixed, and can further be paid either monthly or annually. If any unfortunate incident happens to you during the span of the plan, like disability, accident, death, etc., the sum assured is paid as a lump sum to the beneficiaries of the plan by the insurance company.
In order to encourage buyers to purchase more insurance plans, the Income Tax Department of India came up with the provisions for the policyholders to avail of income tax benefits over the premiums that they pay. The tax benefits through term life insurance can be availed of under the sections in Income Tax Act, such as Section 80C, Section 10 (10D), and Section 80D.
Section 80C deduction on paying a premium of life insurance
Under section 80C of the Income Tax Act 1961, policyholders can avail of tax benefits on the total income for payments that they pay towards the premiums for an insurance policy. The exemption limit is up to INR 1.5 lakhs per annum and can be used by the policyholder. However, some conditions need to be met.
Section 10 (10D) tax exemption on receiving life insurance amount
Under section 10 (10D) of the Income Tax Act, any kind of amount that is received as a death benefit from a term insurance plan is totally free of taxes. There is absolutely no need to pay income tax on this amount; and there are some conditions even for this, which the policyholders would be required to meet. The policyholder must also educate their nominee of the same so that they can avoid being duped in the event when they are claiming the sum assured of the term insurance plan.
Term Insurance tax benefits under Section 80D
Under Section 80D of the Income Tax Act, 1961 also; you can avail of tax benefits in term insurance. Nevertheless, the section is primarily used for claiming tax advantages on premiums of health insurance. Policyholders who go for any add-ons or riders like surgical care rider, critical illness rider, hospital care rider, and many more along with their term insurance policy can avail of tax benefits. However, it all depends on the fulfillment of certain conditions. This benefit is also applicable to the health insurance policy that you take for yourself or for your family members.
To know about the conditions that need to be fulfilled by the policyholders so that they can avail of tax benefits, one can visit the website of IIFL. They can come across a detailed discussion on the same. as they visit IIFL’s website, the policyholders can also find various types of term insurance policies from several insurance companies. They can spare some time and take a thorough look at each of the term insurance policies to find out the right one for their family.