Term Insurance Tax Benefits Under Section 80C, 80D & 10(10D)

Dec 16, 2025
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When it comes to financial planning, term insurance is one of the most affordable and effective ways to secure your family’s future. Along with providing life cover, it also helps you save on taxes. Many people in India consider term insurance only as a safety net for their family, but they often forget about the tax benefits that come with it. By understanding how term insurance tax benefits work under the Income Tax Act, you can protect your family while also reducing your taxable income.

In this guide, we will explore term insurance tax benefits, the different sections of the Income Tax Act that cover them, eligibility, limits, and things you should know before claiming. We will also answer some frequently asked questions so you can make an informed decision.

What is Term Insurance?

Term insurance is a simple form of life insurance policy that provides financial protection to your loved ones in case of your untimely death. You pay a fixed premium for a specific period, known as the policy term. If you pass away during the term, your nominee receives a lump sum amount called the death benefit.

Unlike other insurance plans, term insurance does not provide maturity benefits if you survive the policy term. However, some modern plans offer add-ons like return of premium or riders such as accidental death benefit, critical illness cover, and disability benefit.

The best part? The premiums you pay for term insurance are eligible for tax deductions, and the death benefits received are generally tax-free.

Understanding Term Insurance Tax Benefits

The Indian Income Tax Act offers several sections under which term insurance premiums and payouts are eligible for tax benefits. These sections include:

Section 80C – Deduction for premiums paid
Section 80D – Deduction for riders related to health
Section 10(10D) – Tax exemption on death benefit

Let’s understand these in detail.

Term Insurance Tax Benefit under Section 80C

Section 80C of the Income Tax Act, 1961, allows individuals to claim deductions of up to ₹1.5 lakh every financial year on specified investments and expenses. Premiums paid for term insurance policies fall under this section.

Key Points:

Premiums paid for your own term plan are eligible.
Premiums paid for your spouse and children’s term plans are also eligible.
The maximum deduction limit under Section 80C is ₹1.5 lakh.
To claim the benefit, the annual premium should not exceed 10% of the sum assured (if the policy is issued after April 1, 2012).

Example:
If you purchase a term insurance plan with a sum assured of ₹20 lakh, your annual premium should not exceed ₹2 lakh to get the full tax benefit.

Term Insurance Tax Benefit under Section 80D

Section 80D is primarily meant for health insurance premiums. However, it also covers premiums paid for critical illness riders and health-related riders attached to your term insurance policy.

Key Points:

Deduction up to ₹25,000 per year is available for premiums paid towards health-related riders.
If the rider covers senior citizens (aged 60+), the deduction limit increases to ₹50,000.
This benefit is over and above the Section 80C limit.

Tax Benefit under Section 10(10D)

Section 10(10D) provides tax exemption on the death benefit received by the nominee.

Key Points:

The entire death benefit is tax-free.
There is no upper limit on the exemption amount.
Even maturity proceeds are tax-free in some cases (if return of premium option is chosen), provided conditions are met.

This makes term insurance one of the most tax-efficient financial tools available.

Who Can Claim Term Insurance Tax Benefits?

Salaried Individuals – To reduce taxable income under old regime and save more.
Self-Employed Individuals – To claim deductions and secure family.
Parents – Can buy term plans for children and claim deduction.
Spouses – Can pay for each other’s plan and claim deduction.

Term Insurance Riders and Tax Benefits

Riders are add-ons that enhance your base term plan. Many of them also provide additional tax benefits.

Common Riders:

Critical Illness Rider – Premiums eligible under Section 80D.
Accidental Death Rider – Premiums eligible under Section 80C.
Disability Rider – Provides income replacement, premiums eligible under Section 80C.

Thus, riders not only provide extra protection but also save more tax.

Term Insurance Tax Benefits in Old vs New Tax Regime

In India, there are two tax regimes: the old regime with deductions and exemptions, and the new regime with lower tax rates but no deductions.

Under the old regime, you can claim term insurance tax benefits under Section 80C, 80D, and 10(10D).
Under the new regime, most exemptions are not available, but Section 10(10D) exemption on death benefit is still applicable.

So, if you want to maximize tax savings, the old regime is more beneficial.

Term Insurance Tax Benefit for NRIs

Non-Resident Indians (NRIs) can also claim tax benefits on premiums paid for term insurance, provided they pay taxes in India and the policy is issued by an Indian insurer. They can claim deductions under Sections 80C and 80D, and death benefits remain tax-free under Section 10(10D).

Term Insurance Tax Benefit with Return of Premium (TROP)

Some term insurance plans return the premiums you paid if you survive the policy term. These are called Term Plans with Return of Premium (TROP).

Premiums paid qualify for deductions under Section 80C.
The maturity benefit received is tax-free under Section 10(10D), subject to conditions.

This makes TROP attractive for those who want both protection and savings.

Important Conditions to Claim Term Insurance Tax Benefits

The premium should not exceed 10% of the sum assured (policy after April 2012).
The policy must be in the name of self, spouse, or children (not parents).
Death benefits are always tax-free, regardless of the amount.
Tax benefit under Section 80C is capped at ₹1.5 lakh per year.
If the policy is surrendered within two years, tax benefits claimed may be reversed.

Advantages of Term Insurance Beyond Tax Benefits

While tax savings are an advantage, the real value of term insurance lies in its ability to provide financial security.

High Coverage at Low Premium – Term insurance offers a large life cover at affordable rates.
Financial Security for Family – Ensures your loved ones don’t struggle financially in your absence.
Customizable with Riders – You can enhance coverage as per your needs.
Peace of Mind – You know your family’s future is protected.

Mistakes to Avoid While Claiming Term Insurance Tax Benefits

Not keeping proof of premium payment.
Exceeding the limit of Section 80C.
Assuming benefits are available under the new regime.
Not informing nominee about the policy.
Confusing between health insurance and riders.

Why Term Insurance is a Smart Tax-Saving Tool

Dual benefit of protection + tax savings.
Works well with other tax-saving instruments like PPF, ELSS, and NPS.
Flexible premium payment options.
Exemptions under multiple sections.

For those looking at long-term financial planning, term insurance is one of the best ways to balance risk protection with tax savings.

FAQs on Term Insurance Tax Benefits

Q1. How much tax can I save with term insurance?
You can save up to ₹1.5 lakh under Section 80C and additional deductions under Section 80D if you have health riders. Death benefits are fully tax-free under Section 10(10D).

Q2. Are term insurance death benefits taxable?
No, death benefits paid to the nominee are completely tax-free under Section 10(10D).

Q3. Can I claim tax benefits on premiums paid for my parents’ term insurance?
No, you can only claim for self, spouse, and children. Parents’ policies are not eligible under Section 80C.

Q4. Does the new tax regime allow term insurance benefits?
Under the new regime, deductions under Sections 80C and 80D are not available. However, death benefits under Section 10(10D) remain tax-free.

Q5. Can NRIs claim term insurance tax benefits in India?
Yes, NRIs paying taxes in India can claim tax deductions under Sections 80C and 80D.

Q6. What if I stop paying premiums in between?
If the policy lapses within two years, tax benefits already claimed may be reversed.

Q7. Is Term Plan with Return of Premium (TROP) taxable?
No, the maturity benefit under TROP is tax-free under Section 10(10D), subject to conditions.

Conclusion

Term insurance is not just about financial security—it is also a powerful tool for tax savings. By understanding the provisions under Sections 80C, 80D, and 10(10D), you can optimize your tax planning while ensuring protection for your family. Whether you are a salaried employee, self-employed, or an NRI, investing in a term insurance plan can give you peace of mind and financial advantages.

When planning for the future, don’t just look at tax benefits; focus on the comprehensive security term insurance provides. Tax savings are an additional reward for making the wise choice of protecting your family’s future.