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What are the Tax Benefits of Term Insurance?

To understand what is term insurance, it is the most affordable and the simplest form of all the life insurance products available. A person can get life cover that can be considered substantial at relatively lower premium costs.

Although the term insurance plans do not have any investment product as a feature to it and matures at the end of the plan tenure, one can get several benefits along with additional income tax incentives.

Term Insurance Tax Benefits Under Section 80C

Tax deductions from taxable income under Section 80C can be availed by a term insurance policyholder as well as any member covered under the Hindu Undivided Family (HUF). When considering the case of an individual policyholder, the insured, spouse and their children can avail the tax benefits. Tax benefits for HUFs have a broader claim range as any HUF member can claim tax deductions from taxable income under the section after opting for a term insurance plan.

There is a cap up to which deductions can be claimed under this section. The first limit is Rs. 1.5 lakh in a year based on an individual’s tax slab; there are also other certain limits. For instance, if the premium due for the year is over 20% of the total sum assured, the policyholder can claim a tax deduction of up to 20% of the sum assured for the premium paid in a year.

To better plan for your premium payments and know how much exactly you ought to pay the insurer monthly, you should check the term insurance premium calculator. Using this, you can have a much better perspective of the premiums due and plan your premium payments accordingly.

Tax Benefits for Term Insurance Under Section 80D

Generally, tax benefits under Section 80D are claimed for health insurance plans. Although the majority of the insurers provide term insurance along with critical illness benefits, the policyholder can claim additional deductions under this section as well. The coverage of this benefit can be applied to all the beneficiaries mentioned in the previous point.

However, unlike other deductions, Section 80D has specific clauses:

  • Tax benefits can be claimed only when the amount is less than Rs. 25,000
  • The maximum benefit a policyholder can avail as deductions under Section 80D is Rs. 50,000

Tax Benefits for Term Insurance Under Section 10 (10D)

Section 10 (10D) provides term insurance benefits through tax exemption. Under this section, for the beneficiaries of the said policy, any amount received as a death benefit from a term plan or through a money-back plan or other maturity benefits from a similar money-back plan is exempted from income tax.

The conditions being, the policy is issued after April 1, 2012, and only then, the exemption is allowed. Additionally, the annual premium of the term insurance plan should not exceed 10% of the total sum assured.

When the death benefit payout is more than Rs. 1 lakh and the insurance provider has access to your PAN information, a Tax Deducted at Source of 1% is applied on that amount.

GST Exemption on Term Insurance Premiums

The rate at which GST is applicable depends upon the type of term plan bought. Usually, the general term insurance is charged with a GST rate of 18%. Moreover, the term insurance tax benefit claimed under Section 80C of the Income Tax Act includes charges applied by the insurance provider and the taxes on total premiums paid; this means that the GST paid on term insurance premiums each year can be claimed as deductions under Section 80C of the IT Act.


Thus, there are various term insurance tax benefits one can get; however, tax saving through term insurance should not be the only priority for people looking to buy term insurance. Buying term insurance is necessary as it helps secure your family’s financial future. With a term insurance plan, you can get extensive coverage at very reasonable rates. At the end of the day, having proper health coverage helps you live a stress-free life without worrying about the financial security of you and your family.

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