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How is term insurance covered under Section 80D?

term insurance covered under Section 80D

It is common knowledge how you can save tax by buying term insurance. As a taxpayer, both Section 80C and Section 10(10D) of the Income Tax Act of 1961 work towards your benefit when you buy term insurance. You can either claim the tax advantage for yourself, your husband or wife or your children.

This is applicable for both traditional policies that pay a lump sum amount upon death, or those that offer regular income during policy period. Section 80C offers tax deduction on the total money paid as premium by you for the given financial year as a percentage of the sum assured of your policy. This however depends on the date of purchase, in this case, calculated with March 31, 2012 as the base.

If you are applying for a tax deduction under Section 10(10D), you can demand it both for the lump sum death benefit received from a regular term plan or total maturity benefit received as income at regular intervals during the policy, along with any other profits, such as a bonus.

This condition however does not apply to a sum that you may have got as a part of Section 80DD or 80DDA or the Keyman Insurance Policy. It also does not cover any amount that you may have received other than the death benefit for a policy issued anytime between 1 April 03 and 31 March 2012.

You can save tax by buying term insurance if the date of issue of your policy is either April 1, 2012 and later. The condition is that the total premium that is paid by you should not be more than 10% of the sum assured. Fulfil this criterion and be exempted. However, in case, the total amount calculated by adding the premiums paid during the policy period exceeds 20 percent of the total sum assured received, exemption is denied.

As we know, Section 80D allows tax advantage on the premium that is paid for health insurance. However, there is little information amongst taxpayers as to how to also claim tax benefits on term insurance as per Section 80D. Sounds surprising? Well, you can easily demand a deduction in tax if you have opted for additional cover when buying term insurance along with riders. This could range from something such as critical illness to surgical care or hospital care.

Similar to Section 80C and Section 10(10D), the tax advantages as a part of Section 80D are extended to you as an individual, your husband or wife, your children and even your parents’ dependant on you. A person who belongs to a Hindu Undivided Family (HUF) is also eligible for tax benefits under this section. But specific conditions apply to term insurance cover when it comes to forwarding a claim as per Section 80D. Some of these are:

  • Whether you are claiming a deduction in tax for your own self, your partner, or your children, the combined amount cannot be more than Rs 25,000. This is the maximum that is allowed.
  • In case your parents are less than 60 years of age, then you will be eligible for an additional deduction. This again has a maximum limit of up to Rs 25,000 and not more.
  • For parents, who are senior citizens, which is above 60 years of age, you save tax by buying term insurance for them, since the exemption amount is more. After the 2018 budget, you can claim an additional amount of up to Rs 50,000 as tax benefit if your parents fall in this age group and are insured.
  • In cases where both the taxpayer and the parent for whom insurance has been taken are more than 60 years of age, a maximum deduction of up to Rs 100,000 can be claimed as a tax benefit.

As you can see above, that the tax benefits on term insurance as per section 80D increase with age of both the taxpayer and the dependants. Let us illustrate this with the help of an example through the table below to better understand it.

CasePremium paid for Self, family, childrenPremium paid for parentsTotal deduction claimed under Section 80D
Individual and parentsRs 25,000Rs 25,000Rs 50,000 Rs 25,000 Rs 25,000 Rs 50,000
Individual and family 60 years Rs 25,000 Rs 50,000 Rs 75,000
Both individual, family and parents > 60 years Rs 50,000 Rs 50,000 Rs 1,00,000
Members of HUF Rs 25,000 Rs 25,000 Rs 25,000
Non-resident individual Rs 25,000 Rs 25,000 Rs 25,000

Future Generali Flexi Term Online Plan lets you enjoy the tax benefits of term insurance as per Section 80D with affordable premiums. You get a cover for life up to 75 years of age with a choice of multiple death benefit options available. What’s more, you can even enhance your coverage by opting for a rider that rewards you with benefits should you meet with an accident. So safeguard the future of you and your loved ones with a term insurance plan that fulfils your needs.

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