Each of these options has its pros and cons. It is recommended that you consider your personal needs and financial objectives before investing in one or more of these options.

Term insurance plans are pure life covers that offer your nominees the policy benefits in case of your demise during the tenure. These plans are one of the most affordable and simplest types of life insurance. In addition to being low-cost insurance plans, term policies offer tax benefits under Section 80C of the Income Tax Act, 1961.

Here is how these tax saving schemes work.
1. Eligibility
Individuals and Hindu Undivided Families (HUFs) are eligible to avail of tax benefits on term plans under Section 80C. Such benefits are available to you, your spouse, and children. For HUF assessees, any person who is a part of the family may take advantage of these benefits.

2. Deductions
Availing of a term insurance policy is an excellent tax saving option and provides the following deductions.

• The benefits are limited to 20% of the sum assured if the premium amount during the financial year exceeds 20% of this sum assured
• If the policy is issued after 1 st April 2012, you may claim deductions on the premium amount if it does not exceed 10% of the sum assured
• If you suffer from specified ailments or severe disability, the benefit is available if the premium amount does not exceed 10% of the sum assured for policies purchased on or after 1st April 2012
• The total deductions under Sections 80C and 80CCC are limited to INR 1.5 lakh

3. Additional benefits
In addition to the aforementioned tax benefits, you may be eligible for further deductions under Section 10(10D) of the Income Tax Act, 1961. If you receive any benefits, such as bonus under the policy term, this amount is not taxable. However, these additional benefits are unavailable under the following conditions.

• An amount received under Section 80DD(3) for the demise of a disabled dependent
• If the amount is received through a Keyman Insurance Policy
• Any amount received on a policy purchased on or after 1st April 2003 excluding death benefits

4. Death benefits
Term plans provide a lump sum payout to your nominees in case of your demise during the policy duration. These death benefits are also tax-free for your nominees. However, if the policies are issued after 1 st April 2003, deductions under Section 10(10D) are unavailable if the premium for any year during the policy tenure exceeds 20% of the sum assured.

Availing of a term plan is advisable if you want to save tax. However, it is crucial that you understand all the terms and conditions related to the tax benefits under the Income Tax Act, 1961 prior to your purchase. Seeking the advice of a financial expert before making your decision will be beneficial.

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