Explore How Term Insurance Tax Benefits Can Transform Your Savings

Term insurance is widely acknowledged as a financial security plan. It is closely linked to insurance benefits, but that’s not all. There are many other things that term insurance may bring to your table.

Are you wondering what term insurance benefit is being discussed? Its term insurance tax benefits. Yes, the tax advantage is real and has a solid ground to opt for it. Often, individuals are not aware of that, but let’s break the ice today and discuss them in detail.

Term Insurance Comes Under Which Section of the Income Tax Act 1961?

Term insurance is one of the investments that has underlying double benefits. While financial protection for your loved ones is the popular one, there are tax benefits that can boost your savings. Here are some of the essential sections of the Income Tax Act 1961 that cover tax deductions for term insurance:

Deduction under Section 80C

“Is term insurance covered under 80c?” is one of the questions that any smart tax-payer must know the answer to. It’s a renowned section associated with tax claims on premiums paid. The total deductible amount can go to a maximum of ₹1.5 lakhs per financial year.

The benefits of deductions under Section 80C are as follows:

Increase Savings Potential: When you begin saving on taxes, there must be another place forward to invest it. These savings can further help you meet several financial objectives, like retirement savings, a child’s higher education or an emergency fund.
Lower Your Taxable Income: Term insurance tax benefits under 80C lower your tax liability. This is beneficial if you fall into a higher tax bracket.

Tax deductions are subject to a maximum annual amount of ₹1.5 lakhs. They apply to several investments under this section, such as PPF, ELSS, or home loan repayments. The portion of the premium that is allowed as a deduction cannot exceed 10% of the sum assured of the policy.

Tax Exemption on Maturity or Death Benefit (Section 10(10D))

Apart from 80C, section 10 (10D) gives you term insurance tax benefits on either maturity or death benefit. If the premium is more than 20% of the sum assured, then it shall not be exempted. If it is under 20%, this leads to a tax-free payout. Moreover, in case of a death benefit payout exceeding ₹1 lakh and PAN details are not available with the insurer, then TDS (Tax Deducted at Source) is 1%.

Maximizing Term Insurance Tax Benefits

Tax advantages are easy money, and saving them can help you enhance your financial position. Here are two tips that would help you allocate your savings such that they multiply even further:

Choose the Right Term Insurance Plan: Investing in a good term insurance plan is an important part of your tax savings. Once you’re aware of your term plan, it means you’ll know the premium amount. It is again important to know the correct premium amount and the 20% threshold for death benefit tax exemption.
Allocate Funds in the Right Investment Plans: Investing funds in other tax-saving instruments is a good choice for using term insurance tax benefits. This will also help you diversify financially in future. Have a well-thought-out investment strategy. Invest in options such as PPF, ELSS or ULIPs.

Avail Term Insurance Tax Benefits Today!

Term insurance, for many years, has been considered an investment policy offering financial coverage and security for your loved ones. However, with increasing knowledge around taxes, you may have also become aware of term insurance tax benefits.

You can leverage them by partnering with a trusted insurance provider like Canara HSBC Life Insurance. They have a user-friendly and highly intuitive website where you can find the Financopedia section and learn more about taxes.

Visit their official website to maximise your tax savings on term insurance and invest further today!