How can you save tax with a Term Life Insurance Plan?
All term insurance premiums are deductible from taxable income under Section 80C. The sum assured (maturity amount) received is also exempt subject to conditions under Section 10(10D) of the Income Tax Act, 1961.Tax Exemption under Section 80C on Premium Paid:
The insurance premium paid in a financial year is eligible for deduction under section 80C of the Income Tax Act. An individual and a HUF, both, can claim this deduction under Section 80C. The premium paid by a taxpayer is eligible for deduction irrespective of whichever life insurance company you choose. Premium paid towards a life cover taken with any insurer that is approved by the Insurance Regulatory and Development Authority of India (IRDAI), is eligible for a Section 80C deduction.
To claim deduction under section 80C, the premium paid should not exceed 10% of the sum assured. Further, here it is important to note that covering the life of an individual with a disability referred to under Section 80U or a disease referred to under Section 80DDB, the requirement to claim the deduction under Section 80C is that the premium should not exceed 15% of the sum assured.
The claim amount of a term life insurance policy is fully exempt from Income Tax under Section 10(10D).