Term insurance plans are necessary to protect your family from financial hardship in the case of your untimely death. Moreover, term insurance tax benefits are an outstanding tax-saving financial instrument. It provides significant tax deductions and exemption benefits.
Here is information about tax refunds and insurance benefits. It will assist you in investing and saving more efficiently. So, let us get started!
Advantages of Term Insurance Tax Deductions:
- Article 80C: Financial instrument investments are tax-deductible under Section 80C of the 1961 Income Tax Act. Consequently, premiums paid for term insurance qualify for a tax deduction under Section 80C. Section 80C allows for a total removal of 1,500,000. It applies when purchasing term insurance coverage for oneself, one’s spouse, or children. Term insurance tax benefits apply to HUF (Hindu Undivided Family) and all its members.
- Article 80D: Health insurance premiums are tax-deductible under Section 80D of the 1961 Income Tax Act. However, if you have selected health riders# as part of your term insurance coverage, you may be eligible for tax deductions under Section 80D of the Income Tax Act. It can be determined with a term insurance calculator.
Health riders provide additional financial aid to handle medical expenses incurred due to the diagnosis of critical illnesses, terminal conditions, etc. Treatment and hospitalisation are covered under this particular plan as well. It applies to the insured, spouse, children, and parents’ term insurance plan. In the case of an accident that causes a handicap, few insurance policies pay out the covered sum.
This deduction benefit has certain restrictions:
- The tax benefit is refundable up to 25,000.
- If the term plan is for your parents’ benefit, you can claim an additional 25,000 deductible.
- You can also deduct up to 50,000 if you or your parents are seniors.
- These benefits are accessible to HUF members.
*Currently, there are 2 tax regimes in India – new and old. To get the tax benefit you desire, choose the correct one after consulting an expert. You can opt for a regime change during the next financial year.
Term Insurance Tax Exemptions Benefits:
- The Income Tax Act of 1961 exempts term insurance payments from taxable income. Insurance bonuses and death benefits are included. If you outlast the policy period, the return of premium option will refund your amount. Lump-sum returns are tax-exempt.
- To be eligible for exemption benefits, you must complete the following requirements:
- You should not have received a Section 80DD(3) or Section 80DDA payment (3).
- It would help if you still needed to receive a payout from the Keyman Insurance Policy, a life insurance plan purchased by the firm or employer for a critical employee still employed by the company.
- If the term plan is purchased before March 31, 2012, the premium shall not exceed twenty per cent of the assured sum.
- If the term insurance policy is obtained on or after April 1, 2012, the premium shall not exceed 10% of the total sum assured.
- We are aware of the tax advantages afforded by these schemes. Nevertheless, if you have decided to cancel your term plan, you may do so during the free-look period.
Refund Process and Specifics for Term Insurance:
The free look period is when policyholders must return their refundable term insurance and obtain a refund. The reasons may include disagreement with the terms and circumstances, inability to afford the premium, discovering a better option, etc.
If you decide to return the policy, you must do so within 15 days after the policy’s delivery date. And if you obtained the refundable term insurance policy through distance marketing, you must return it within 30 days of the policy’s receipt date.
Here are the steps required to return a purchased term plan and obtain a refund:
- Notify the insurance company that their policy will no longer be needed.
- Send a letter outlining the rationale for the cancellation, and provide the original policy document with the letter.
- Your bank account will be credited with the appropriate amount once the refund has been processed by the insurance provider
- Nevertheless, the amount of the refund will be diminished by the total number of premiums that were paid while the term plan was active. The amount that was spent on medical expenses and any other stamp duty fees will also be deducted from the insurance payout.
* Standard T&C Apply
Term insurance is a must for those who wish to protect their family financially in the event of their untimely passing away. With the help of the term insurance calculator, decide on the investment cost as it is inexpensive, offers a more significant sum secured and is refundable. In addition, they qualify for a variety of tax benefits. Be mindful of these tax provisions and maximise the term plan’s long-term financial rewards for more security.