What are the Term Insurance Tax Benefits under Sections 80C & 80D?

Term insurance is a kind of life insurance policy that covers a specific period, or “term” of years. Suppose the insured person passes away within the selected term. Then, a certain death benefit will be paid to the designated inheritor.

But is term insurance tax-free? No, but you do get a tax deduction up to Rs. 1.5 Lacs under the section 80C. Similarly, under section 80D, you get a tax benefit of up to Rs. 25,000 per year for yourself, your spouse, and your dependent children.

Term Insurance Comes Under Which Sections of the Income Tax Act (ITA)?

Term insurance is available under three sections of the Income Tax Act (ITA): 80C, 80D, and 10 (10D). While sections 80C and 80D discuss tax deductions, 10 (10D) mentions that the death benefit can help your family finally without paying any tax.

Now, how does the term insurance under these sections work?

Term Insurance Under 80C

This term insurance is available to individuals and Hindu Undivided Families (HUF). You can claim the benefits when you file your income tax returns.

Savings Up to Rs. 1.5 lacs on the Paid Premiums

This is one of the popular sections that allows you to save up to Rs. 1.5 lacs per year for investments in various financial products. However, make sure you choose the old tax regime for the financial year.

You can invest in life insurance or term insurance premiums, 5-year Long Fixed Deposits, Equity-linked Saving Schemes, etc. If you want small savings schemes, go for Senior Citizen’s Savings Scheme, National Pension System, Public Provident Fund, etc.

Term Insurance Under 80D

As with section 80C, individuals and HUFs can claim this term insurance benefits. However, to receive the deductions, you must check your plan first to see if the riders you chose offer any medical coverage or insurance benefits.

Save up to Rs. 75,000 on the Paid Premiums

This section offers deductions on health insurance premiums. You can also apply it to term insurance plans that include riders who are critically ill. The deduction under Section 80 D is Rs 25,000 for individuals and Rs 50,000 for elderly citizens.

Suppose you’re an individual and you have a 70-year-old family member at home. You can apply for a health premium policy of 25,000 for yourself and 50,000 for your relative, resulting in a deduction of Rs. 75,000 altogether.

How can Term Insurance Help You Save Taxes?

Term insurance offers you coverage for a certain period at a lower cost than traditional life insurance.

The Indian Government allows tax deductions on term insurance premiums under sections 80C and 80D. It reduces your taxable income and saves you some tax every year!

You can purchase these term plans for both yourself and your loved ones. Now, let’s find out the tax benefits for each section —

Tax Benefit Under Section 80C

You can receive these benefits regardless of your marital status and age or dependency of your child.

The tax deduction amounts up to Rs. 1.5 lacs every year. This applies to both residents and non-residents of India. But companies, partnerships, and other corporate associations can’t apply for it.

However, you need to keep some conditions in mind —

Yearly Premiums Should not Exceed 10%

If the policy is issued after the 1st of April, 2012, your yearly premium can’t be more than 10% of the total sum. You can’t claim the benefit otherwise.

For example, if the total sum is Rs. 100,000, your yearly premium can’t be more than Rs. 10,000.

The amount is 20% for policies issued before April 1st, 2012. Another exception applies if your policy is bought after April 1st, 2013, and covers a disabled person. In that case, your yearly premium can’t be more than 15%.

No Tax Benefits According to 80C(5)

If you voluntarily surrender or terminate a policy within two years of creating it, you won’t receive any tax benefits on your premium payments.

Other Conditions Under 80C

Apart from the mentioned factors, these are what you should keep in mind too —

• 80CCC offers deductions on pension plans and certain mutual funds.
• 80CCD (1) states that you can get tax benefits by investing in pension schemes backed by the government (e.g. National Pension System)
• 80CCD (1B) offers an extra deduction of up to Rs. 50,000 if you’re investing in the NPS scheme.
• 80CCD (2) says that if you’re employed, your employer's contribution towards your NPS (up to 10%, including your salary and dearness allowance) will also be exempted from tax.

Tax Benefit Under Section 80D

If you’re paying health insurance premiums, you can receive a tax deduction from the Indian government. The amount paid for health insurance is reduced from your taxable income. So, as a result, it lowers the amount of tax you owe!

The deduction limit depends on for whom you’ve taken the health insurance policy (yourself, spouse, children, or parents).

Amount Doesn’t Exceed Rs. 25,000

If you’re purchasing health insurance for yourself, you can claim the 80D deduction as long as the amount doesn’t exceed Rs 25,000.

Insurance Policy for Parents

Imagine your parents are over 60, and you’ve bought health insurance policies for them individually. These policies include health insurance riders, too. Since they’re senior citizens, the government allows you a deduction of an extra Rs 50,000.

This means that in total, you can save up to Rs. 75,000 according to 80D.

Other Conditions Under 80D

Besides these two major factors, keep these conditions in mind, too -

• You can get preventative health checkups for up to Rs. 5,000 for yourself, your spouse, dependent children, or your parents.
• If a senior citizen doesn’t have health insurance, he can reduce up to Rs. 50,000 from his medical expenses.
• If you contribute to the Central Government Health Scene (CGHS), you can claim a tax benefit of up to Rs. 25,000. However, this doesn't count contributions made on behalf of parents.

What are the Eligibility Criteria to Claim Term Insurance Tax Benefits?

As previously discussed, you can only receive a tax deduction if you’re an individual or a member of the HUF (Hindu Undivided Family).

However, you won’t receive any benefits unless the policyholder is —

Self

Any premiums you pay toward your own term insurance will qualify for a tax reduction.

Spouse

If you pay the premiums for your spouse’s term insurance policy, you’ll receive a tax deduction according to 80C.

Dependent Spouse

You'll receive a tax deduction if your spouse has no separate income and depends on you.

Dependent Parents or In-Laws

Similarly, you can claim deductions for your parents or in-laws if they depend financially on you.

Secure Financial Security for You and Your Loved Ones with PNB MetLife

We understand the importance of financial security for you and your loved ones. If you find these sections and conditions complicated, no worries because PNB MetLife plans are here to help you out —

Insurance Products We Offer

Depending on what solutions you’re looking for, we have several insurance products:

Family Protection Solutions:

Saral jeevan beema, POS-Suraksha, Mera jeevan suraksha plan, etc.

Long Term Savings Solutions:

Goal ensuring multiplier, Mera wealth plan, Capital guarantee plus, Bachat yojna, etc.

Child Education Solutions:

Genius plan, Guaranteed goal plan, Smart platinum plus, etc.

Retirement Solutions:

Grand assured income plan, Retirement savings plan, Saral pension plan, etc.

Group Solutions:

Group flexi term plus, Complete care plus, Group secured gain, Loan & life suraksha, Pradhan mantri jeevan jyoti bima yojna, etc.

Riders:

Accidental death benefit rider plus, Senior illness rider, Critical illness rider, Group accidental permanent and Total disability plan, Group serious illness rider, etc.

PNB MetLife Term Insurance Premium Calculator

We also offer an excellent tool called the PNB MetLife Term Insurance Premium Calculator to make it easy for you. This tool helps you to get an estimate of the cost of the term insurance plan. It counts:

• The death proceeds your family will receive
• Tenure of the coverage
• Any optional add-ons like riders
• Your age, gender, and health

Secure financial stability with PNB MetLife

Dealing with the death of your loved one or any accidental situation can be daunting. Here’s where term insurance comes into play. Term insurance can offer you some tax benefits under sections 80C & 80D, which can greatly reduce your burden.

Learn about the eligibility criteria and conditions before applying for term insurance. Keep your budget, financial needs, health, riders, and family status in mind. PNB MetLife is here to make your life easier, so take a look at our plans!