Term Insurance Tax Benefits in 2026: Under Section 80C, 80D & 10(10D)

Term insurance plays a pivotal role in protecting one's financial future.

While it provides much-needed life coverage, the tax benefits associated with term insurance are another compelling reason to opt for it. For those seeking to reduce their taxable income, the term insurance tax benefit offers an excellent opportunity to save.

In this article, we will explore how term insurance provides tax advantages under three significant sections of the Income Tax Act: Section 80C, 80D, and 10(10D), and how these benefits will apply in 2026.

What is Term Insurance and Why is it a Popular Choice for Tax Saving?

Term insurance is a simple life insurance plan that offers financial protection to the policyholder's family in case of their untimely demise. It provides coverage for a specific period, and in exchange for regular premium payments, the nominee receives a death benefit.

The key advantage of term insurance is its affordability compared to other life insurance products. For many people, it’s the ideal way to secure a large sum assured at a low cost.

One of the reasons term insurance remains so popular is the associated tax benefits. The term insurance tax benefit allows policyholders to reduce their taxable income, thereby lowering their tax liabilities.

For individuals looking to make the most of their term plan, understanding the tax benefits in 2026 is crucial, especially given the evolving rules and potential changes in tax regulations.

Tax Benefits Under Section 80C: Maximizing Deductions on Premium Payments

Section 80C of the Income Tax Act provides the most well-known tax benefit for individuals investing in financial products, including term insurance. Under this section, premiums paid for term insurance policies are eligible for deductions, up to a maximum of ₹1.5 lakh per year.

Can Term Insurance Be Claimed Under 80C?

Yes, term insurance premiums qualify for deductions under Section 80C, allowing you to reduce your taxable income by the amount paid towards your premium. For instance, if you pay ₹50,000 annually in premiums for your term insurance plan, this amount can be deducted from your total income. This reduces the overall income on which you are taxed, thereby lowering your tax outgo.

To benefit from this deduction, the premium must be within the limit set under Section 80C, which is ₹1.5 lakh annually. This limit also applies to other eligible tax-saving investments like the Public Provident Fund (PPF), National Savings Certificates (NSC), and tax-saving fixed deposits.

However, one should remember that term insurance premiums are deductible under Section 80C only if they do not exceed 10% of the sum assured. If the premiums exceed this limit, the deductions under Section 80C will be applied proportionately, ensuring that you don’t exceed the prescribed limit for tax benefits.

For a better understanding of the complete Section 80C benefits, visit Section 80C of Income Tax Act.

Term Insurance Tax Savings with Riders: Additional Deductions Under Section 80C

While a basic term insurance plan offers tax savings, adding riders can enhance both coverage and tax benefits. Riders like Critical Illness or Accidental Death increase the premium, but they also provide additional deductions under Section 80C.

When you add a rider to your term insurance, the additional premium paid for the rider is also eligible for deductions under Section 80C. This could significantly boost your tax savings, especially when the riders provide valuable benefits such as critical illness coverage, which is essential in today’s healthcare environment.

The impact of adding riders to your term insurance can be calculated using a term insurance calculator, which will give you an estimate of how much your premium will increase and how that translates into additional tax benefits.

Section 80D: Tax Benefits on Health-Related Riders in Term Insurance Plans

While Section 80C provides tax benefits on the base premium of your term plan, Section 80D adds a unique advantage when health-related riders, like Critical Illness or Surgical Care, are included in the policy. These health-related riders offer coverage for critical health conditions and can help policyholders safeguard their well-being while reaping tax advantages.

What is Section 80D?

Section 80D of the Income Tax Act allows deductions for premiums paid towards health insurance, but it also applies to certain health riders added to a term insurance policy. If you add a Critical Illness rider to your term plan, the premium paid for that rider is eligible for tax benefits under Section 80D.

80D of Income Tax Act and Term Insurance

The tax benefit under Section 80D is available only if you opt for the old tax regime, as the new tax regime does not offer deductions for health-related riders. The deduction available is up to ₹25,000 for premiums paid on policies covering self, spouse, and children. An additional ₹25,000 is available for premiums paid for the coverage of parents who are under 60 years of age. If the parents are senior citizens (above 60 years), the deduction is increased to ₹50,000.

For more details on Section 80D, visit Section 80D of Income Tax Act.

Section 10(10D): Understanding Exemption on Death and Maturity Benefits

Section 10(10D) of the Income Tax Act deals with the tax-exempt status of death benefits and maturity proceeds from insurance policies, including term insurance. The term insurance exemption in income tax applies here, meaning the amount paid to the nominee upon the death of the insured or the maturity benefit is not taxable under most conditions.

10(10D) Income Tax: Death Benefit Exemption

The key benefit of Section 10(10D) is that the death benefit received by the nominee is tax-free, irrespective of whether the insured has opted for the new or old tax regime. This applies to term insurance policies and ensures that your family receives the full sum assured without any deductions.

However, there are conditions attached to this exemption. For instance, the premium paid must not exceed 20% of the sum assured for policies issued before 2012. For policies issued after that date, the premium should not exceed 10% of the sum assured for the death benefit to be fully tax-exempt.

For a deeper dive into Section 10(10D), visit Section 10 10D of Income Tax Act.

Comparing Tax Benefits Across Different Types of Term Insurance Plans

The tax benefits can vary depending on the type of term insurance plan chosen. Some plans offer the return of premium feature, where the premiums paid are refunded if the policyholder survives the term. This adds a layer of investment to the term plan, and in some cases, it can provide additional tax benefits.

However, the term plan with a return of premium option typically comes with higher premiums than a basic term plan. This higher premium, while offering an added benefit, can also increase the tax deductions available under Section 80C.

Deciding between a basic term plan or a plan with riders or return of premium depends on individual needs and the desired tax savings.

Common Mistakes to Avoid When Claiming Term Insurance Tax Benefits

Many policyholders miss out on tax savings due to common mistakes. Here are a few key points to remember when claiming the term insurance tax benefit:

• Inaccurate Premium Calculation: Ensure the premiums for the base policy and any riders are calculated correctly. Overpaying or underpaying can affect the deductions.
• Missing Documentation: Always maintain the necessary documents, like premium receipts and certificates, to back your claim.
• Not Claiming GST: The GST paid on term insurance premiums can be claimed as a deduction, but many policyholders overlook this.

Avoiding these mistakes will ensure you maximize your tax benefits without any hassle.

The Impact of the New Tax Regime on Term Insurance Tax Benefits

With the introduction of the new tax regime, taxpayers can opt for lower tax rates in exchange for foregoing deductions and exemptions. Unfortunately, the new tax regime does not offer deductions for term insurance premiums or health riders. This makes the old tax regime a better choice for individuals who want to maximize their term insurance tax benefit.

Choosing the old tax regime allows you to claim tax deductions under Section 80C, Section 80D, and Section 10(10D), making it a more tax-efficient option for term insurance policyholders.

Practical Steps for Claiming Tax Benefits on Term Insurance in 2026

Claiming tax benefits for term insurance in 2026 involves a few steps. For salaried individuals, submitting the Form 12BB along with the necessary documents is essential. This form is used to declare investments and tax-saving expenses. Keep receipts and premium certificates safe for future reference.

For self-employed individuals, the process involves declaring the premiums in the ITR form, and the deductions will be adjusted accordingly. It is essential to ensure that all required documents are in order to avoid delays or issues during tax filing.

Bottom Line

To make the most of your term insurance tax savings, consider adding riders to your policy and selecting the right plan for your needs. Combining term insurance with other tax-saving instruments can help reduce taxable income even further. Using a term insurance calculator can also help you plan your premiums effectively.

In 2026, with the evolving tax landscape, term insurance continues to be an excellent vehicle for reducing tax liabilities while securing your family’s financial future.

Additionally, policyholders should refer to the TDS rate chart to understand how tax deductions at source may impact their overall savings and tax filing.

Related Articles:

Maximize Savings with Term Insurance Tax Benefits in India
What are the Term Insurance Tax Benefits under Sections 80C & 80D?
Maximize Your Saving: Guide to Term Insurance Tax Benefit
What is Term Insurance, & How much Term Insurance Coverage do I need?

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