Section 80C & 10D in Term Insurance – Tax Deductions & Exemptions
Life insurance is one of life’s most important things you need to make sure your family has a stable and comfortable life. Life insurance’s financial benefits help your family build a safe and secure future, even if you die. As per the Income Tax Act, there are also tax breaks for life insurance under Sections 80C and 10D.
Section 10 (10D) says that all payments from your life insurance plan are eligible for a tax exemption and do not have to be taxed or subject to income tax. Even more interesting is that incentives and surrendering values are not taxed under section 10 10(D) as per the Income Tax Act of 1961. Read on to find out what term insurance tax benefits are covered by Section 10(D) of the Income Tax Act and how it works.
What is Income Tax Act Section 10?
Under Section 10 (10D) of the IT Act, 1961, a person’s maturity or death benefit from a term life insurance policy is not taxed. This also applies to any premiums that have been paid but not yet paid. This exemption is available for several life insurance claims. It also applies to payments from unit-linked insurance plans with a total premium of less than 2.5L in a financial year, either at the end of the plan’s term or earlier, as long as the rules are followed.
What exemptions are in Section 10 (10D) of the Income Tax Act?
Under Section 10 (10D), the Income Tax Act of 1961, you can get the following tax breaks:
- If the term plan premiums paid in a single year for a policy bought between April 1, 2003, and March 31, 2012, were not more than 20% of the insurance coverage, a person may be eligible for Section 10 deductions (10D).
- But if the policy is bought after April 1, 2012, the premium should not be more than 10% of the amount covered.
- When it comes to life insurance bought before April 1, 2013, the exemption does not exceed 15% of the guaranteed value if the insured person gets seriously injured.
- In section 80U of the act, a list of the kinds of disabilities that fall into this group is given. These include developmental disorders, autism, and so on.
- In Section 80DDB, you can find a list of the illnesses that this waiver covers.
On the other hand, according to Section 80C, you can get a tax break on the premiums you pay for life insurance up to Rs.1,50,000. You can also get a tax break if the amount of premiums you pay in a financial year is 20% of the sum assured amount of the policy. This only applies to life insurance policies bought before March 31, 2012.
For policies that were issued after April 1, 2012, the amount of the premium paid in a financial year is 10% of the sum assured. This amount is tax-deductible. If you need help remembering all the benefits, you can always use the term insurance calculator.
Under section 80C(5), if the insurance policyholder gives up his policy on his own or if the policy ends before two years from the date the policy started, the insured will not get any of the benefits offered on the premium paid by section 80C of the Income Tax Act. If the insured passes away, the beneficiary of a term plan does not have to pay taxes on the maturity or bonus amount received from the policy.
- An insurance policy gives you cash to pay for medical bills and other expenses. This extra coverage provides you and your family financial security. It helps a lot when things go wrong that you didn’t plan for. With the money in hand, you can focus on your immediate needs and let your insurance company handle the rest.
- But insurance policies do more than just protect against death. Under Section 10(10D) and Section 80C of the IT Act of 1961, they can also help you save money on taxes.
- Under Section 80C, you can avail of term insurance tax benefitsand deduct up to 1.5 lakhs from your taxes for the premiums you have to pay in a given year.
- Section 10(10D) lets you deduct all accumulated rewards against the demands, such as death and maturity benefits.
- Under Section 10(10D), claims like death and maturity benefits, as well as all types of earned bonuses on the corresponding insurance policies, can get tax breaks. Under this clause, any life insurance claim is eligible for a tax break, and there is no maximum amount. Use the term insurance calculator to make the right choice. * Currently, there are 2 tax regimes in India – new and old. To get the tax benefit you desire, choose the correct one after consulting an expert. You can opt for a regime change during the next financial year.