Numerous life insurance businesses in India from different insurance firms offer hundreds of plans for different needs and age groups, which can help you save on tax under various parts of the Income Tax Act, 1961.

You must purchase life insurance, especially if you are the only provider for your family. You are responsible for providing for the financial stability of your spouse, parents, and kids. However, you must also consider the tax repercussions of purchasing a life insurance policy while adopting a strategy.

Life insurance has tax advantages under Sections 80C and 10D of the Income Tax Act. Deductions and exemptions make up the majority of the life insurance tax advantages.

What is Section 80C?

Under Section 80C of the Income Tax Act 1961, you may deduct the cost of life insurance premiums for yourself, your spouse, or your children from your taxable income. Your maximum deduction will be of up to Rs. 1.5 lakh.

The deduction under section 80C shall be permitted whether your child is dependent or independent, minor or major, married or single.

Many taxpayers are unsure whether this deduction is exclusive to life insurance policies purchased through LIC. That is untrue. Any insurer's life insurance premiums are eligible for a Section 80C deduction. However, the Insurance Regulatory and Development Authority of India (IRDAI) must have approved the insurance provider from which you are purchasing insurance.

Few points to note regarding the Tax deductions under Section 80C:

  • Only individuals and Hindu Undivided Families are eligible for this type of deduction (HUF).
  • Sections 80C, 80CC, and 80CCE allow for a maximum exemption from taxation of Rs. 1,50,000.
  • If the benefit has been requested under this section and the policy gets cancelled or terminated within two years of the policy's start date, the benefit will be reversed. This applies to all life insurance policies, except for ULIPs, for which the maximum term is five years.

What is Section 10(10D)?

The provisions of Section 10(10D) of the Income Tax Act, 1961 must be met for the returns from life insurance policies to be tax-free

The sum assured amount plus bonus (if any) paid upon surrender or maturity of the policy or in the event of the insured's death is completely tax-free for the receiver under Section 10(10D) of the Income Tax Act, 196.

Gains and proceeds from ULIPs are subject to Section 10(10D) deduction, and the advantage on maturity proceeds is provided where the premium paid for the policy does not exceed 10% of the guaranteed sum.

If the maturity proceeds reach Rs. 1 lakh, a tax deduction at source (TDS) will be necessary to maintain compliance, and the insurer will deduct 1% as TDS (Tax Deducted at Source) if the policyholder's PAN is accessible.

However the following situations will result in taxation of the policy proceeds and will not allow deduction.

  • Annuity or pension plan payouts.
  • Plans for group life insurance that employers support

The above restrictions do not apply to death benefits or any sums paid after the life insured's death.

The maximum deduction permitted under Section 10(10D) has no upper limit.

Investments eligible for deduction under Section 80C of The Income Tax Act

Other than premium pain on life insurance policies, Schemes like Equity Linked Saving Scheme (ELSS), National Pension Scheme (NPS), Unit Linked Insurance Plan (ULIP), Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Fixed Deposit (FD), Employee Provident Fund (EPF), etc are also eligible for deduction under section 80C of ITA, 1961

Things to remember when availing tax saving benefits under section 80 C & 10D

For life insurance policies purchased after March 31, 2012, the premium paid during any particular year during the policy term must not exceed 10% of the sum assured.

And for life insurance policies purchased between April 1, 2003, and March 31, 2012, the premium paid during any particular year during the policy term cannot exceed 20% of the sum assured.

Additionally, premiums paid on policies purchased after April 1, 2013, on the lives of people with disabilities or diseases listed under Sections 80U and 80DDB, respectively, are tax-free as long as the premium paid does not exceed 15% of the sum assured.


The above information was derived from the Income Tax Act of 1961, and tax regulations can change. Before making any financial decisions, please review the most recent information about tax-saving strategies in the aforementioned sections. Before you sign your policy contract, ask your insurance provider about the tax savings options under the various parts.

Purchase the life insurance policy you believe is best for you since it offers you security and protection and qualifies for tax benefits under sections 80C and 10(D) of the Income Tax Act(ITA), 1961. Numerous life insurance policies offered by various insurers will assist you in reducing your tax obligations under the ITA, 1961

Frequently Asked Questions:

Can I save more than 1.5 Lakh Rs in 80C?

No, Under Section 80C, you are only permitted to deduct a maximum of 1.5 lakh rupees from your gross income. Other than the cost of a life insurance policy, Section 80C covers a wide range of investments and costs that you can deduct, but only up to a maximum of Rs. 1.5 lakh every fiscal year. 

How do I claim exemption under 10(10D)?

Only after meeting the requirements outlined in section 10(10D)—all of which are covered in the article above—can you take advantage of tax deductions under this provision.

Who is eligible for 10(10D)?

Anyone who recieves claim made under life insurance is eligible for a tax exemption under this clause that too without any maximum limit.

How can I save tax under 80D?

Premium paid on medical insurance and expense incurred towards preventive health checkups can be claimed as a deduction from the total income under Section 80D.

Is 80D included in 1.5 Lakh Rs deduction limit?

No its not included, you can claim separate deduction for expenses covered in section 80D

Is it possible to claim 80C deductions if someone is registered under new income tax regime?

No, the new tax rate regime does not offer as many deductions and exclusions as the previous/existing tax rate regime. Section 80C deductions are not accessible if the taxpayer selects the New regime's low tax slab rates.