Tax Benefit on Term Plan

Who is eligible for tax benefits?

Policyholders do not receive tax benefits on their own. In reality, the tax exemptions favour the policyholders' dependents as well.

• Benefits of the Income Tax Act under Section 80C

Term insurance policy premium must be paid on a regular basis. The premiums charged on term insurance are tax-deductible under Section 80C of the Income-tax act. however, the deduction is subject to certain restrictions. This may include the following:

1. Policyholders who purchased term insurance policies on or after April 01- 2012 will be eligible for a tax deduction on premiums. It charged up to 10% of the gross amount assured.
2. Policyholders can claim a tax deduction on the overall premiums charged for term insurance policies offered on or before March 31, 2012, as long as the premium amount does not exceed 20% of the sum guaranteed.
3. Policyholders can be eligible for tax benefits on premiums when they have been diagnosed with a serious illness or are disabled. the amount does not exceed 15% of the total sum guaranteed. This provision, however, only applies to term insurance policies purchased on or after April 1, 2013.

• Benefits of the Income Tax Act under Section 10 (10D)

This tax benefit is only available to the dependents or nominees. Any amount earned as a death benefit is tax-free under Section 10(10D) of the Income Tax Act.  the nominee is eligible for a tax exemption on the assured amount sum received from the life insurance company.
Individuals and members of Hindu Undivided Families may take advantage of the tax benefits listed in the previous cases (HUFs).

What are Policy Refunds?

People purchase term insurance plans to ensure full financial coverage. Mostly, life insurance companies sell Insurance plans through agents in India. Some agents misrepresent these policies as high-earning investment products and deceived the investors.

The Insurance Regulatory Development Authority of India (IRDAI) allows the free-look period provision. It ensures that when policyholders purchase any insurance product, they will not get deceived and receive the benefits they seek.

According to this provision, Policyholders who discover that the benefits of the policy they have are not what they expected can return it within 15 days of receiving it. When the policy was purchased through distance marketing the free look period is extended up to 30 days from the policy receipt date.

Policyholders must notify the insurance company of their decision to cancel the policy. They can mail a letter to notify with giving a reason for cancellation. Also, the original policy documents need to be attached with the cancellation letter. Only after deducting the proportional amount of risk premium cover, as well as any expenses incurred on the policyholder's medical examination and stamp duty, the insurance company refund the premium amount paid.

Conclusions on Tax Benefits and Refund Information for Term Insurance

There are many people who purchase term insurance to take advantage of tax benefits. But before purchasing a term insurance policy this method should be avoided. Thus, the aim of purchasing term insurance should be to provide financial coverage for the insured's entire life.

This assured sum amount (also known as death benefits) should be measured After considering the dependent's possible future needs like -

1. current debts
2. potential liabilities, and expenditures
3. inflation rate
4. value of existing assets
5. liquidity

The term insurance Tax benefits are like icing on the cake. Even with the fact that you have already secured the much-needed insurance cover.  There is no better investment or financial instrument than a term policy for insuring one's life. At the time of filing income tax returns, understanding the tax benefits will assist you in obtaining the necessary deductions