Tax benefits of Term Insurance plans| PNB MetLife

Tax benefits of Term Insurance plans| PNB MetLife

Tax benefits of Term Insurance plans| PNB MetLife

Buying term insurance is one of the best ways to guarantee your family’s continued well-being and financial security, even in your absence. A term insurance policy can prove to be a great investment that provides value even if you are no longer around to see it for yourself.
Aside from acting as a valuable tool for your family in the event of your demise, availing term insurance also offers you (policyholder) several benefits. In fact, buying insurance and paying regular premiums, whether monthly or annually, both offer several tax benefits to the policyholder. 

Term insurance tax benefits encompass three different components of the insurance policy. These include the premiums paid for the policy, the lump sum amount that is paid out to the policyholder’s nominees upon their death, and the income amounts. Several policies include the option of giving the lumpsum amount to the nominees or providing it as an income over a long-time period. Depending on the policy opted for, term life insurance tax benefits differ for different policyholders. Read More

Read on to learn about the tax benefits that will allow you to save more and build a substantial corpus for meeting your long-term and short-term goals. These term insurance tax benefits are available to policyholders under different sections of the Income Tax Act, 1961.

  1. Section 80C:
    This section pertains to the premiums paid for a life insurance policy. Under this section, Rs. 1.5 lakh is the maximum amount that may be claimed as deductions. Section 80C says that tax deductions may be claimed on premiums paid for insuring the self, dependents or children and the spouse as well. Additionally, these deductions can be claimed by any members of a Hindu Undivided Family (HUF) as well. Whether or not you are paying your premiums in monthly or annual installments, you must ensure that it stays below 10% of your Sum Assured, in order for you to be able to successfully claim the appropriate tax deductions. While this is true for policies issued after March 31, 2012, if your policy has been issued before the said date, you will be able to claim tax deductions even if your premium amount to 20% of the Sum Assured.

  2. Section 10(10D):
    This is the section that is relevant to any payouts received from the insurer. It covers the maturity of the policy or even its surrender by the policyholder, as well as the sum assured received by the policyholder’s nominees upon their death. Section 10(10D) ensures that the amount received is completely free from taxation, regardless of whether it is the sum assured, any bonuses paid to the nominees or due to the policyholder surrendering the policy.

These sections of the Act ensure that individuals get tax benefits on life insurance. However, there are certain conditions associated with availing term insurance tax benefits. These include:

  1. In order to claim tax benefits with life insurance premiums, it is best to make payments of premiums through methods other than cash. This could include paying your premiums through internet banking, cheques, credit cards or even draft. This is because the law prohibits tax deductions for premiums paid via cash.

  2. Section 80C mandates that tax deductions can only be claimed for years for which premium has been paid. Thus, if you have selected an insurance policy where you must only pay premium once, you will only be eligible to tax deductions on your premium for one single year. If you are looking to avail higher tax benefits on term insurance, make sure that the premium is payable over a period of time - thereby allowing you to claim tax benefits over a period of time.

Insurance plans, especially term insurance, offer a range of benefits for policyholders and their nominees. Term insurance tax benefits are available to everybody paying premiums on ensuring their loved ones are looked after even if they are no longer around. Planning to buy Term Insurance, visit our website for various Term Plans offered by PNB MetLife.


The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.

