Tax Benefits of Term Insurance Plans that Grant more Savings

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We all have heard the phrase “money saved is money earned”. This clearly shows how keen we are on saving our hard-earned money, right? Well, in that case, buying term insurance can be beneficial in securing your family’s future as well as saving taxes. However, before delving deeper, we must first try to understand what a term insurance plan is.

What is a term insurance plan?

It can be called the simplest type of life insurance policy. Once you purchase it, the term plan will give you life cover for a period, provided you are paying the premium amount. The death benefit can be availed by the beneficiary that you choose for the plan.

Term insurance plans are usually affordable and on adding a rider, you can avail of additional benefits. However, it does not provide any survival benefit but you can enjoy term insurance tax benefits.

Tax Benefits of Term Insurance Plan

When you purchase a term insurance plan, you do not avail of one but several term plan tax benefits. Let us take a look at the term insurance tax benefits.

Section 80C

This is one of the most basic term insurance tax benefits that can be availed by the insured. Under section 80C of the Income Tax Act, 1961, you will be able to avail of term insurance tax benefits of up to Rs. 1.5 lac for the premiums that you pay so that your family can get the term insurance benefits on your untimely death. Under this section, the upper limit of tax deduction includes tax benefits on investments in tax-saving Fixed Deposits, Public Provident Fund (PPF), and many other tax-saving instruments.

You need to know that the annual premiums paid for a term insurance plan should not exceed 10% of the sum assured that you chose. If it does not exceed, under section 80C, the term insurance tax benefits are applied proportionately.

Section 80D

Under section 80D, tax deductions are allowed in the premiums that are paid for health insurance. The term insurance tax benefits under 80D are offered indirectly. You can get tax benefits under this section if you chose health-related riders such as surgical care cover, critical illness cover, etc. The more riders you go for, the maximum tax savings to can do, along with getting the health insurance cover.

Section 10 (10D)

Under section 10 (10D), the policyholder and the family can not only avail of the term insurance tax benefits but can also save money through tax exemptions. To put this simply, the death benefit that the family will get under this section is tax-exempt.

Under this section, there are no upper limits for the term insurance tax benefits. The entire death benefit that the beneficiary will get is tax-exempt. However, as a term insurance policyholder, you must be aware of the fact that the term insurance tax benefits under this section are subject to certain conditions. If the premium that is payable during the period of the policy does not exceed 20% of the sum assured, the death benefits get non-taxable.

Apart from all these, you can also save taxes by getting some riders. However, it may vary from one rider to another. You can also check for the premiums you have to pay with the help of an online term insurance calculator. To know more about the term plans and the term insurance companies that are offering such term plans, you can visit IIFL Insurance today. You can carry out a thorough comparison of the various term insurance plans and choose the one that you think is right for the future of your family.

Read More: 3 Tips on How to Save Taxes Using Deduction Under Section 16

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