Does Term Insurance Come Under 80C?

Now you can be worry-free knowing that your family’s future is secure by simply buying a term insurance policy!

Most people have the general notion that a term insurance holds no necessary value except until the demise of the policy holder. This is not true. There are various benefits of being a term insurance policy holder such as convenient payment options, higher returns, financial security, family security, tax benefits and so on.

Term insurance is a type of insurance that is availed for a specific number of years. It is moderately priced and does not have any cash value. Term insurance is cheaper than other insurance policies. Insurance companies offer term insurance policies like life insurance to provide their customers with financial security for a period in future. The policy materializes only when the policy holder dies within the mentioned period in the agreement during which the term insurance policy persists.

Most insurance companies offer term insurance policies. Almost all these term insurance policies have a fixed characteristic of converting these term insurance policy into permanent policies, regardless of the policyholder’s current health. The premium you will pay directly depends on your age, smoking habits, alcohol consumption, health, weight, medical history, gender and life style habits.

Characteristics of Term Insurance policy:

·         Limited deduction

·         Maximum limit of Rs. 1, 50, 000

·         Policy Holders can choose their plan whether single or joint

·         High sum for low premiums

·         Benefit of survival

·         Convenient and flexible options of payment

Benefits of a Term Insurance Policy:

·         Death benefit

·         Financial Security

·         Tax benefit

·         Higher assured returns

·         Survival benefit

·         Various plan choices

·         Extra benefits

Section 80C:

Taxes play a significant role in our country. It is the way through which money  is collected by the government to especially raise community facilities. This assists the country in maintaining its economy as well as allows citizens to articulate their income. The good news is that the government also provides exemptions. It does this by releasing or decreasing the amount that is taxable by your income, if you save up a large sum of money over the entire year.

Section 80C is one of the great tax saving tools available to us. Section 80C replaced the older section 88C. The former came into effect from 1^st April, 2006.

In Section 80C, you can declare your savings and get the maximum amount of tax deductions by the government. Tax deductions are the amount you can minus from your taxable income in one financial year.

Section 80C of the Income Tax Act conveys that premium paid towards any Life Insurance Policy is entitled to tax benefits. Hence, this can be considered as an advantageous tax planning aid.

Under Section 80C you can claim up to Rs. 1.5 Lakh every financial year. The earlier limit of section 80C was Rs. 1, 00,000 till 2014-2015. This relies on the payments and investments an individual or a Hindu-Undivided-family (HUF) makes. Investments or payments made for term insurance policies (life insurance policies), purchase of a house, construction, tuition fees, tax-saving fund, mutual funds, saving bonds and so on; are granted under this section for tax deduction. Any amount paid towards life insurance can be included in Section 80C.

Therefore, a term insurance policy is beneficial in many ways other than just securing the future of you or your family. It serves as a long-term goal, saves tax, provides financial security and has add on benefits.

Benefits of tax benefits under Section 80C: Section 80C provides various tax benefits and deductions to term insurance (life insurance) policy holders.

For individual policy holders, the following persons are eligible to obtain tax benefits:

·         The policy holder himself

·         Spouse of the policy holder (husband or wife)

·         The policy holder’s children

For Hindu-Undivided Family (HUF), any one person within the family is eligible for receiving the tax benefits:

·         Under Section 80C, the respective policy holder can claim up to Rs. 1. 5Lakh.

·         If any person is suffering from a disease or disability, he or she can claim tax benefits and deductions provided the premium paid is not more than 10%.

·         Tax benefits and deductions can be claimed if not more than 10% of the initial amount assured of the premium has been paid.

·         Through the financial year, tax benefits can be claimed on premium up to 20% of the initial amount assured.

Following are a few pointers to keep in mind pertaining to Section 80C for term insurance policies: Along with so many advantages, its important to take note of certain guidelines.

·         While claiming deduction under Section 80C, the minimum holding period of the term insurance (Life Insurance) must be of 2years.

·         Altogether, the total deduction amount that is allowed is Rs. 1, 50, 000.

·         Deduction is not available to names other than mentioned in the policy.

·         In case you are paying premium for more than one insurance policy, all premiums can be included.

·         PPF contribution.

·         Tax free benefits received by policy holder’s nominees, in case of his/her death.

·         Be sure that the total sum assured of the term insurance policy is at least 20 times than that of the annual premium you pay in that one year.

·         If the term insurance policy has been issued on or after April 1st, 2012, then the tax deduction would be applicable only for the total premium amount up to 10% of the maximum amount assured.

·         If the term insurance policy has been issued on or before 31^st March 2012, then the tax deduction would be applicable only for the total premium of up to 20% of the sum assured.

·         If you suffer from any disease or disability, then tax deduction is applicable if you have not paid premium up to 15% or more of the total amount assured. This is effective for term insurance policies that have been issued on or after 1^st April 2013.

                                                                         

In conclusion, Term insurance policy is a must for the sole bread winner of a family and for individuals looking for tax exemptions as Section 80C has proved to be a boon to term insurance policy holders. Diversified  investment options for tax savers is one of the many benefits that Section 80C constitutes of! Term insurance policies have their benefits that make an individual stress free about the future and with the incorporation of Section 80C it makes it profitable for them too.