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What are the tax benefits on life insurance?

Life insurance is one of the most prominent tax saving investments available today. When you buy an insurance policy, you are entitled to receive tax deductions under Section 80 C Of the Income Tax Act 1961.These tax deductions considerably lower your taxable income, which in turn increases your overall savings.


Tax benefits Under Section 80C

Investing in a life insurance policy allows you to avail of several tax benefits under Section 80C. Tax saving terms under this section are:

  • You can avail tax deductions up to Rs. 1,50,000 under this section;
  • The deduction is allowed up to 10% premium of the sum assured for policies purchased after 1st April 2012;
  • For policies issued before 1st April 2012, deductions on premium are allowed up to 20%of the sum assured (even if the holder pays more than 20% of the sum assured in one financial year);
  • If the insurance policy is discontinued within two years if its commencement, the tax benefits received would be reversed;
Tax Benefits Under Section 10 (10D)

Under Section 10(10D), any sum received at maturity of a Life Insurance Policy, is exempted from tax. However, this exemption is not applicable to:

  • Amount received under Section 80DDA(3) or 80DD(3);
  • Maturity benefits received under a Keyman Insurance Policy;
  • Sum received under any insurance policy (other than as death benefit) issued on or after April 1, 2003, during the term of which the premium paid is more than 20% of the sum assured;
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