Tax Benefits on Life Insurance

Income deductions under Section 80C

Premiums paid towards life insurance are eligible for income deductions under Section 80C of the Income Tax Act, 1961. You may take out the policy in your or your spouse or children's names. Under Section 80C, you can claim deductions of up to Rs. 150,000 p.a. across various 80C investments.

You may claim the income deduction so long as the premium paid does not exceed 10% of the sum assured for policies issued after (1st April 2012). The cut-off limit for income deductions on policies issued before 1st April 2012 is 20% of the sum assured.

Deductions under Sections 80U and 80DDB

Under Sections 80U and 80DDB, you can claim income deductions of up to 15% of the sum assured on life insurance plans covering individuals with disabilities and individuals with illnesses or diseases, respectively.

Tax Exemption on maturity amount received under Section 10(10D)

Under Section 10(10D), any amount received as bonus throughout the insurance tenure or on the maturity of the insurance policy is fully exempted from income tax. This section of the Income Tax Act also applies to individuals covered under Section 80U and Section 80DDB.

In case the premium paid exceeds 10%, 15%, or 20% quota of the sum assured, any payments received from the life insurance policy will be fully taxable.

TDS on life insurance plans

W.e.f. October 2014, any amount received from your life insurance provider (including bonus payments) exceeding Rs. 100,000, will be eligible for tax deduction at source (TDS). TDS is not applicable on amounts less than Rs. 100,000 and you can claim credits for TDS deducted while filing your tax returns.