Tax Benefits of Term Insurance
Section 80C on premiums, Section 10(10D) on death payouts — and what the new tax regime changes.
Note: Tax rules are updated each year. Confirm current limits on the Income Tax Department site or with a tax advisor before filing.
Section 80C — premiums
Premiums paid towards a term insurance policy on the life of self, spouse, or children qualify for deduction under Section 80C, within the overall 80C ceiling (which includes PPF, ELSS, EPF and others). This applies under the old tax regime.
Section 10(10D) — death benefit
The death benefit received by the nominee is generally exempt from tax under Section 10(10D), subject to conditions on the premium-to-sum-assured ratio. Pure term plans almost always satisfy these conditions, making the payout to the nominee tax-free.
Old vs new tax regime
Section 80C deductions are available only under the old regime. If you have opted for the new tax regime, premiums don't get the deduction — but the death payout itself remains tax-exempt under most term plans.
Don't buy term for tax
Buy term for protection. Tax benefits are a bonus. The 'best' term plan is the one with the right cover, the highest CSR, and the lowest fair premium — not the one with the biggest tax sticker.
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