Term insurance is a pure protection plan that provides financial security to your family in case you pass away during the policy term. Beyond offering family protection, term insurance comes with various other benefits, including tax advantages under the Income Tax Act, 1961.
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| Section | Tax Benefit |
| Section 80C | Deduction up to ₹1.5 lakh on premium paid (Old Tax Regime only) |
| Section 80D | Additional deduction up to ₹25,000-₹1 lakh on health rider premiums (Old Tax Regime only) |
| Section 10(10D) | Death benefit is tax-free for nominees (Both Old & New Tax Regime) |
| GST (Sep 2025) | 0% GST on term insurance premiums from 22nd September 2025 |
Term insurance tax benefits are the deductions as well as exemptions you can claim under the Income Tax Act when you buy a term plan. These benefits help you lower your taxable income and ensure that your family receives the policy payout without tax deductions.
Term insurance offers more than a single tax advantage. You can claim multiple benefits under three sections of the Income Tax Act:
Once you understand how these rules work, it becomes easier to save money every year. So, let’s understand each of these sections more clearly so that you’re not confused about what to do next when it comes to making a tax claim.
Under Section 80C, the money you pay as premiums for your term insurance can be deducted from your taxable income. This helps you pay less tax while keeping your family protected. It’s one of the most widely used tax-saving options in India.
A common question people have is whether Section 80C has any conditions for term insurance tax benefits. The short answer is yes. To be eligible for Section 80C deductions on your term insurance premium, the following conditions must be met:
| Condition | Requirement |
| Premium Limit (Post April 1, 2012) | Annual premium paid should not be more than 10% of the sum assured |
| Premium Limit (Pre March 31, 2012) | Annual premium must not exceed 20% of the sum assured |
| Minimum Policy Duration | Policy must be active for at least 2 years from the date of purchase |
Remember that the ₹1.5 lakh limit under Section 80C is a combined limit. It includes your term insurance premium plus other tax-saving investments such as:
Tip: Want to maximise your tax savings? With the ACKO Life Flexi Term Plan, you can save up to ₹54,600* on your taxes and get flexible coverage.
Section 80D of the Income Tax Act mainly allows tax deductions on premiums paid for health insurance. While primarily for health insurance, this section also covers health-related riders attached to your term insurance policy.
The following riders attached to your term insurance qualify for Section 80D benefits:
| Category | Self & Family | Parents |
| Self + Parents (all below 60 years) | ₹25,000 | ₹25,000 |
| Self below 60 + Parents (60+) | ₹25,000 | ₹50,000 |
| Self + Parents (Senior Citizen 60+) | ₹50,000 | ₹50,000 |
| Maximum Total Deduction | ₹1,00,000 | |
Let's understand these two different term insurance tax benefits with the help of an example. Imagine you have a 1 crore term insurance and a critical illness rider:
| Component | Annual Premium | Tax Benefit Section | Deduction You Can Claim |
| Base Term Insurance Premium | ₹12,000 | Section 80C | ₹12,000 |
| Critical Illness Rider | ₹8,000 | Section 80D | ₹8,000 |
| Total Tax Benefit | ₹20,000 | ||
Section 10(10D) of the Income Tax Act make sure that the death benefit from your term plan goes to your family fully and tax-free.
Term insurance tax benefits under Section 10(10D) come with a few conditions. So, let’s understand when the death benefit becomes taxable to help avoid confusion.
Important:
One of the most common questions people ask about term insurance tax benefits is whether it falls under Section 80C or 80D. The answer depends on the type of premium you pay:
| Component | Section | Maximum Deduction |
| Base Term Insurance Premium | Section 80C | Up to ₹1.5 lakh (cumulative) |
| Critical Illness Rider | Section 80D | Up to ₹25,000 - ₹1 lakh |
| Surgical Care Rider | Section 80D | Up to ₹25,000 - ₹1 lakh |
| Death Benefit (Payout) | Section 10(10D) | Completely tax-free |
Here's how term insurance tax benefits differ between the two regimes:
| Tax Benefit | Old Tax Regime | New Tax Regime |
| Section 80C (Premium Deduction) | Available (up to ₹1.5 lakh) | Not Available |
| Section 80D (Health Riders) | Available (up to ₹1 lakh) | Not Available |
| Section 10(10D) (Tax-Free Death Benefit) | Tax-Exempt | Tax-Exempt |
In September 2025, the government removed GST from individual life insurance premiums. This includes individual term insurance.
Here’s a quick look at what changed:
| Previous GST Rate | 18% (term insurance premiums) |
| New GST Rate | 0% |
| In Effect From (Date) | September 22, 2025 |
| Applicable To | All individual life insurance policies, including term insurance |
| Annual Premium | Earlier (with 18% GST) | Now (0% GST) |
| ₹10,000 | ₹11,800 | ₹10,000 |
| ₹20,000 | ₹23,600 | ₹20,000 |
| ₹50,000 | ₹59,000 | ₹50,000 |
| Annual Savings | 18% of premium | |
Let’s make this process easy to understand so you’re not left confused when it’s time to claim your tax benefits.
Here’s what you’ll need to keep handy when claiming your term insurance tax benefits:
Before you claim tax deductions on your term insurance, check if you meet these basic criteria laid out under the Income Tax Act.
Tax benefits can be claimed on term insurance policies held in the name of:
Here are some simple things you can keep in mind when choosing a term plan to maximise your term insurance tax benefits:
A lot of people lose their term insurance tax benefits without realising it. Here are a few mistakes you should avoid:
ACKO Life Flexi Term Plan is designed for modern lifestyles. It offers long-term financial protection with unmatched flexibility. Here's how you can benefit from tax savings with ACKO:
Check all 21 critical illnesses covered under the ACKO Life Critical Illness Rider: Click here
Here’s a list of common questions and answers related to Term Insurance and Income Tax.
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet and is subject to changes.
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Reviewed by Vaibhav Kumar Kaushik 
Acko Technology & Services Private Limited
#36/5, Hustlehub One East, Somasandrapalya, 27th Main Rd, Sector 2, HSR Layout, Bengaluru, Karnataka 560102
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