In the intricate web of tax-saving options, term insurance emerges as a powerful instrument, not just for providing financial security but also for unlocking valuable tax benefits. Let’s navigate through the realms of the Income Tax Act to understand how term insurance can become your shield against tax burdens.
Term Insurance Tax Benefits
1. Term Insurance Tax Benefit under Section 80C
Investing in the future pays off, literally. Section 80C allows a substantial deduction of up to ₹1.5 lakhs for term insurance premiums. However, a few conditions dance on this tax-saving stage:
- Ensure your yearly premiums stay within 10% of the sum assured.
- For policies pre-dating March 31, 2012, the threshold extends to 20% of the sum assured.
- Voluntarily surrendered or terminated policies within two years forfeit the tax benefits.
2. Term Insurance Tax Benefit under Section 80D
Traditionally dedicated to health insurance, Section 80D now embraces term plans with critical illness covers. Here’s a glimpse:
- A deduction cap of ₹25,000 is set for premiums paid.
- An additional deduction of ₹25,000 is granted for policies covering parents.
- If your parents are senior citizens, the limit escalates to ₹50,000.
3. Term Insurance Tax Benefit under Section 10(10D)
Section 10(10D) paints a tax-free landscape for the sum assured upon maturity, surrender, or the unfortunate demise of the policyholder:
- Exemption criteria include premiums staying below 10% of the sum assured or the sum assured being at least ten times the premium.
- If the payout exceeds ₹1,00,000 and the policyholder’s PAN is on stage, a 1% TDS applies.
Canara HSBC Life Insurance
Canara HSBC Life Insurance introduces the iSelect Smart360 Term Plan, a comprehensive shield offering coverage for an impressive 99 years. Beyond the standard benefits, this plan stands out with:
- A unique feature allowing the policyholder to block the premium rate and boost the base sum assured by up to 100% in the initial five years.
- Coverage for 40 critical illnesses, coupled with other perks.
Nutshell
The Term insurance not only secures your loved ones but also acts as a strategic tax-saving ally. Understanding the nuances of tax benefits across different sections of the Income Tax Act empowers you to make informed decisions, ensuring both financial security and tax efficiency.
