Term Insurance Tax Benefits: 80C and 10(10D)

Cheat Sheet

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Section 80C: Deduct term insurance premiums up to ₹1.5 lakh/year (old tax regime only). Shared limit with PPF, ELSS, EPF.

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Section 10(10D): Death benefit payout to your nominee is 100% tax-free under both old and new regimes.

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Section 80D: Premiums for health riders (critical illness, accidental death) get a separate deduction: ₹25,000 (under 60) or ₹50,000 (60+). Old regime only.

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GST on term insurance: Slashed from 18% to 0% for individual policies from September 22, 2025. Riders also at 0%.

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Old vs New Regime: 80C and 80D deductions work only under the old regime. But the tax-free death benefit (10(10D)) applies under both.

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HUF and NRIs: Hindu Undivided Families and NRIs earning Indian income can also claim 80C deductions on term insurance premiums.

Why You Should Care About Tax Benefits of Term Insurance

Is term insurance tax-free? For the payout your family receives, yes: it is 100% exempt from income tax. Most people buy term insurance for one reason: to protect their family. That is the right reason. But here is something many buyers overlook: each term insurance tax benefit adds up to meaningful tax savings every single year you hold the policy.

We are not talking about a single deduction tucked away in one section. Term insurance touches three separate sections of the Income Tax Act: 80C for premiums, 10(10D) for the death benefit, and 80D for rider premiums. Stack them together, and the tax math gets genuinely interesting.

And if you bought or renewed a term plan after September 2025, there is more good news. GST on individual term insurance premiums dropped from 18% to zero. That is not a minor tweak; it is a structural change that makes term insurance cheaper than it has been in years. Let us walk through every tax benefit, section by section, so you know exactly what you can claim.

Section 80C: The Premium Deduction

What Qualifies Under 80C

Every year you pay premiums for your term insurance policy, that amount qualifies for a tax deduction under Section 80C. This applies to premiums paid for yourself, your spouse, and your children. If you are paying for a parent’s policy, that does not qualify under 80C.

The maximum deduction under Section 80C is ₹1,50,000 per financial year. But here is the catch: this is a shared limit. Your EPF contributions, PPF deposits, ELSS investments, home loan principal repayment, children’s tuition fees, and term insurance premiums all compete for the same ₹1.5 lakh bucket.

The 10% Rule You Cannot Ignore

For policies issued after April 1, 2012, your annual premium must not exceed 10% of the sum assured. If it does, the 80C deduction is proportionally reduced. For a ₹1 crore term plan with a ₹12,000 annual premium, the 10% threshold is ₹10 lakh. You are well within limits. Most pure term plans clear this rule easily because premiums are low relative to coverage.

Old Regime Only: A Critical Detail

Section 80C deductions are available only if you file under the old tax regime. The new tax regime, which became the default from FY 2023-24, does not allow 80C deductions at all. If you have already switched to the new regime for its lower slab rates, you cannot claim your term insurance premium as a deduction. We will cover how to decide between regimes later in this article.

HUF and NRI Eligibility

Hindu Undivided Families (HUFs) can claim 80C deductions for term insurance premiums paid on the life of any HUF member. NRIs who earn income in India and pay term insurance premiums from that Indian income can also claim the 80C deduction when filing their Indian tax return.

Section 10(10D): Your Nominee Gets the Full Amount, Tax-Free

How Tax-Free Death Benefit Works

This is the section that matters most to your family. Under Section 10(10D), the death benefit your nominee receives from a term insurance claim is completely exempt from income tax. If you have a ₹1 crore term plan and your nominee files a claim, they receive ₹1 crore. No TDS. No tax liability. The full amount.

This is not a deduction (where you reduce taxable income). This is a full exemption (where the money simply does not count as income).

The Condition to Keep in Mind

For the death benefit to be fully tax-free, the annual premium must not exceed 10% of the sum assured (for policies issued after April 1, 2012). Since term insurance premiums are typically a tiny fraction of the sum assured, almost every term plan meets this condition automatically.

Works Under Both Tax Regimes

Unlike 80C, this benefit is not regime-dependent. Whether your nominee files under the old tax regime or the new one, the death benefit remains 100% tax-free. This difference matters. Even if you have chosen the new tax regime and given up 80C deductions, the core financial protection for your family stays intact.

What About TROP Plans?

Term Return of Premium (TROP) plans pay back your premiums if you survive the policy term. This maturity or survival benefit is also tax-free under Section 10(10D), provided the premium does not exceed 10% of the sum assured. However, TROP plans cost significantly more than pure term plans, so the tax-free return needs to be weighed against the higher premiums you pay over decades.

Section 80D: The Rider Deduction Most People Miss

Which Riders Qualify

If you have added health-related riders to your term insurance policy, the premiums for those riders qualify for a separate deduction under Section 80D. This includes critical illness riders, surgical care riders, and accidental death benefit riders. The key word is “health-related.” A premium waiver rider or an income benefit rider does not qualify under 80D.

Deduction Limits Under 80D

The deduction limit is ₹25,000 per year if you are below 60 years of age. For senior citizens (60 and above), the limit is ₹50,000. This is a separate limit from 80C. You are not choosing between them; you can claim both if you pay for a base term plan (80C) and health riders (80D).

One important note: like 80C, the Section 80D deduction is available only under the old tax regime. If you file under the new regime, you cannot claim rider premiums as a deduction.

How to Check Your Premium Split

Your insurer’s premium receipt or annual statement should break down the total premium into the base plan component and rider components. If it does not, contact your insurer and ask for the bifurcation. You need this split to correctly claim 80C and 80D separately in your tax return.

GST on Term Insurance: What Changed in September 2025

What Changed in September 2025

Until September 21, 2025, every term insurance premium you paid carried 18% GST. On a ₹12,000 annual premium, that was ₹2,160 in GST alone. From September 22, 2025, the GST Council reduced the rate on individual life insurance policies (including term insurance) to 0% as part of the GST 2.0 reform. This applies to both new policies and renewals.

Riders Are Covered Too

The 0% GST rate applies to riders attached to individual life insurance policies as well. If you are paying ₹6,000 for a critical illness rider, you no longer pay ₹1,080 in GST on top of it. The savings are straightforward and automatic; your insurer applies the new rate from the effective date.

Group Insurance: Still at 18%

The GST reduction applies only to individual policies. If your employer provides group term insurance, that policy still attracts 18% GST. This is relevant if you are comparing the cost of employer-provided cover versus a personal term plan.

What This Means for Your Wallet

Let us put real numbers on this. If your total annual premium (base + riders) was ₹18,000, you were paying ₹3,240 in GST under the old 18% rate. Under the new 0% rate, that GST drops to zero. Over a 30-year policy term, that is ₹97,200 saved in GST alone. Not a windfall, but not nothing either; especially when combined with the income tax deductions above.

Old vs New Tax Regime: What Changes for Term Insurance Buyers

The Comparison at a Glance

Tax Benefit	What It Covers	Deduction / Exemption Limit	Old Tax Regime	New Tax Regime
Section 80C	Term insurance premiums (self, spouse, children)	Up to ₹1,50,000/year (shared limit)	Available	Not available
Section 10(10D)	Death benefit payout to nominee	Fully exempt (no upper limit)	Available	Available
Section 80D	Health rider premiums (critical illness, accidental death)	₹25,000 (below 60) / ₹50,000 (60+)	Available	Not available
GST Rate (Individual)	GST on premium payments	0% (from Sep 22, 2025)	Applies equally	Applies equally
GST Rate (Group)	GST on group policy premiums	18%	Applies equally	Applies equally

When the Old Regime Makes More Sense

If your total deductions under 80C, 80D, HRA (80GG), home loan interest (24b), and NPS (80CCD) add up to a meaningful amount, the old regime can result in lower tax liability despite higher slab rates. Term insurance premiums are just one piece of that puzzle, but they contribute to the total deduction stack.

For someone in the 30% tax bracket under the old regime, a ₹12,000 term insurance premium deduction under 80C saves ₹3,600 in tax. A ₹6,000 rider premium under 80D saves another ₹1,800. These are small amounts individually, but they add up when combined with other 80C and 80D eligible expenses.

The Bottom Line on Regime Choice

Do not choose your tax regime based on term insurance alone. Use your insurer’s or the income tax department’s tax calculator to compare your total liability under both regimes. The term insurance deduction is a contributing factor, not the deciding one. And remember: regardless of which regime you pick, your family’s death benefit stays tax-free.

Case Study: How Swati Saves Tax With Her Term Plan

Swati is a 34-year-old marketing manager at a mid-sized firm in Pune. Her annual salary is ₹14,00,000. She bought a ₹1 crore term insurance plan three years ago. Her annual premium for the base term plan is ₹11,000. She also added a critical illness rider for ₹6,000 per year.

Swati files under the old tax regime because her total deductions (EPF, PPF, home loan, and insurance) exceed ₹4 lakh. Here is how her term insurance fits into her tax picture.

Section 80C deduction: Swati claims her ₹11,000 base premium as part of her 80C deductions. At the 30% tax bracket (her taxable income before deductions is above ₹10 lakh), this saves her ₹11,000 x 30% = ₹3,300 in tax. She also pays 4% cess, so the effective saving is ₹3,432.

Section 80D deduction: Her ₹6,000 critical illness rider premium qualifies under 80D. At the same 30% bracket plus cess, this saves her ₹6,000 x 31.2% = ₹1,872.

GST savings (post-Sep 2025): Before September 2025, Swati paid 18% GST on her total ₹17,000 premium, which was ₹3,060. After the GST 2.0 reform, that GST is ₹0. She saves ₹3,060 every year.

Total annual savings: ₹3,432 (80C) + ₹1,872 (80D) + ₹3,060 (GST) = ₹8,364 per year. Over her 30-year policy term, that is ₹2,50,920 in total savings; and her family has ₹1 crore of tax-free protection throughout.

What Should You Do Next?

Your next step depends on where you stand today.

If you already have a term plan and file under the old regime: Check your premium receipt for the base-premium and rider-premium split. Make sure you are claiming 80C for the base plan and 80D for health riders separately. Many people lump everything under 80C and miss the additional 80D benefit.

If you already have a term plan and file under the new regime: You cannot claim 80C or 80D deductions, but your family’s death benefit is still fully tax-free under 10(10D). Run the numbers on both regimes using the income tax department’s calculator; you might find the old regime saves you more once you account for all your deductions.

If you do not have a term plan yet: The tax benefit should not be your primary reason to buy term insurance. Protection comes first. But the tax savings make the effective cost of a term plan even lower than the already low premium suggests. With GST now at 0%, this is a good time to compare plans and get covered.

If you are an NRI or part of an HUF: Confirm that your premiums are being paid from Indian income (for NRIs) or from HUF funds (for HUFs). Keep premium receipts and ITR filings aligned. Consult a CA if your situation involves cross-border income.

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Frequently Asked Questions

Is term insurance covered under 80C?

Yes. Premiums you pay for a term insurance policy qualify for deduction under Section 80C, up to the shared limit of ₹1.5 lakh per year. This applies to premiums paid for yourself, your spouse, and your children. The deduction is available only under the old tax regime. For policies issued after April 1, 2012, the annual premium must not exceed 10% of the sum assured.

Is the death benefit from term insurance tax-free?

Yes. Under Section 10(10D), the death benefit your nominee receives is completely tax-free. There is no TDS, no income tax, and no upper limit on the exemption. This applies under both the old and new tax regimes. The only condition is that the annual premium should not exceed 10% of the sum assured for policies issued after April 2012.

Can I claim both 80C and 80D for term insurance?

Yes, if your term plan has health-related riders attached. The base premium qualifies under 80C (up to ₹1.5 lakh shared limit), and the rider premium for critical illness, accidental death, or surgical care qualifies under 80D (₹25,000 or ₹50,000 for senior citizens). These are separate deduction limits. You need a premium bifurcation from your insurer to claim them correctly.

Is term insurance under 80C or 80D?

The base term insurance premium falls under Section 80C. If you have added health-related riders (critical illness, accidental death benefit), those rider premiums fall under Section 80D. The base plan and riders are treated separately for tax purposes. Ask your insurer for a premium breakup if your receipt shows only the total amount.

What is the GST rate on term insurance in 2026?

For individual term insurance policies, the GST rate is 0%. This has been effective since September 22, 2025, when the GST Council reduced it from 18% as part of the GST 2.0 reform. The 0% rate applies to new policies, renewals, and riders on individual policies. Group term insurance policies still attract 18% GST.

Can I claim term insurance tax benefit under the new regime?

Partially. Under the new tax regime, you cannot claim Section 80C (premium deduction) or Section 80D (rider premium deduction). However, the most important tax benefit still applies: Section 10(10D) ensures that the death benefit your nominee receives is completely tax-free, regardless of which tax regime you or your nominee files under.

Is term insurance tax-free?

The death benefit from term insurance is completely tax-free under Section 10(10D) of the Income Tax Act, with no upper limit. Your nominee receives the full sum assured without any tax deduction. Premiums paid are also tax-deductible under Section 80C (old regime), making term insurance one of the most tax-efficient financial products available. However, if you survive the policy term on a pure term plan, there is no maturity payout, so the question of tax on maturity does not arise. For TROP plans, the returned premiums are also tax-free under 10(10D), provided the premium did not exceed 10% of the sum assured.

Your Term Insurance Is More Than Protection

Term insurance does its primary job quietly: it makes sure your family is financially secure if something happens to you. The tax benefits do not change that core purpose, but they make the cost of owning a term plan lower than most people realize. Between 80C, 80D, 10(10D), and the recent GST elimination, you are getting protection at a genuinely small net cost.

Want to see how much coverage you need and what it would cost? Use our term insurance calculator to get a personalized estimate in under two minutes.