VMPL
New Delhi [India], September 16: Term insurance provides financial support to families when the policyholder passes away during the policy term. It offers a lump sum amount to dependants, which can help them manage their financial needs. Along with this protection, a term plan also provides several tax-related advantages under current laws. These tax provisions allow policyholders to reduce their taxable income and manage their yearly liabilities effectively. This article explains the tax perks of term insurance in 2025.
Tax Deduction on Premiums Paid under Section 80C
Premiums paid toward a term insurance plan may qualify for a deduction under Section 80C of the Income Tax Act. This section allows you to reduce your taxable income up to ₹1.5 lakh in a financial year. The benefit is available when you choose the old tax regime. This deduction is available only if premiums do not exceed the legal limits. It supports individuals in lowering their taxable income.
If you pay annual premiums for your policy, you may include this amount under your Section 80C declaration. Along with other eligible investments like provident fund or tuition fees, your insurance premiums also contribute to the overall limit of ₹1.5 lakh. This means the while calculating your taxable income the premium amount is also considered. For many individuals, this section is a common way to save on taxes.
Tax Deduction on Health Riders under Section 80D
If you add a health-related rider to your term insurance plan, you may also claim benefits under Section 80D of the Income Tax Act. This section applies to premiums paid for health-related coverage. The deduction may be up to ₹25,000 for individuals below sixty years and up to ₹50,000 for senior citizens. Riders, such as critical illness or hospital care, allow you to benefit from this section. This deduction is separate from the Section 80C limit.
Tax-Free Death Benefit Under Section 10(10D)
The death benefit paid to the nominee under a term insurance plan is exempt from tax under Section 10(10D) of the Income Tax Act. This means that the nominee receives the entire amount without any tax deduction. The exemption applies when the policy follows the rules of the Income Tax Act. This helps ensure that the family of the policyholder receives the full payout.
Exemption Under Section 10(10D)
The key advantage of Section 10(10D) is that it helps ensure the nominee receives the entire death benefit tax-free, provided the policy meets certain conditions. As long as the annual premium remains within the prescribed percentage of the sum assured, the full payout may qualify for exemption. This provision helps families maximise the financial support from the policy without any tax deductions.
Benefits Offered in Old Tax Regime
Terms Since 2020, taxpayers in India had the option to choose between the old and new tax regimes. The old regime allows several deductions, including those on insurance premiums under Section 80C and 80D. The new regime offers lower tax rates but does not provide most deductions. If you want to claim deductions on insurance premiums, you need to choose the old regime. Your choice depends on your financial situation and long-term plans.
Term Insurance Benefits in 2025
There are several term insurance benefits that you can avail in 2025. Along with providing financial protection, a term insurance plan also offers tax insurance benefits. Section 80C, Section 80D, and Section 10(10D) benefits give strong support. These sections together help ensure that both policyholders and their families receive tax relief as well as financial security. Trusted platforms like Tata AIA offer term insurance and also provide tax benefits. Such options allow individuals to include term insurance as an important part of their financial planning.
Conclusion
A term insurance plan in 2025 is not only about protection but also about tax relief under the Income Tax Act. Premiums may qualify for deductions under Section 80C, and health riders may be eligible for additional deductions under Section 80D. The death benefit payout is exempt under Section 10(10D), which ensures that nominees receive the amount without tax deduction. By selecting the old tax regime, policyholders may avail these tax benefits. Understanding these sections and their conditions helps individuals make informed decisions.
Disclaimer: The information provided above is for informational purposes only and is not intended as professional or legal advice. The Insurance Regulatory and Development Authority of India (IRDAI) is not responsible for any decisions made based on the information.
(ADVERTORIAL DISCLAIMER: The above press release has been provided by VMPL. ANI will not be responsible in any way for the content of the same.)