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Section 10(10D) Tax Benefits

By Finserv MARKETS - Jan 9,2020
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section 10(10D) tax benefits

Life insurance policies provide your family with a safety net in the unfortunate event of your demise. It prevents a financial emergency from being thrust upon them by providing them with a sum of money and dealing with your debts and outstanding liabilities. In addition to this, all types of life insurance, including term insurance, come with certain tax benefits. With most popular benefit being the deduction of up to rupees 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Money received under insurance benefits counts as income and falls under the ambit of income tax. Certain provisions in our taxation law, however, provide specific exemptions, one of which is for benefits received by individuals through life insurance policies.

There is another provision which is at least equally, if not more important – Section 10(10D).

What is Section 10(10D)?

Section 10(10D) of the Income Tax Act, 1961 lays out rules regarding the taxability of claims. Under Section 10(10D), claims such as the death benefit and other accrued bonuses arising out of life insurance policies are not taxed.

There are a couple of terms and conditions to the same, however:

  • The premium should not be more than 10 percent of the assured sum/the assured sum should be at least ten times the amount being paid as premium. For insurance policies that were issued before April 2012, similar to these terms, the premium must be less than 20% of the assured sum.
  • The assured sum in addition with any bonus which is paid out in case of death of the policyholder, surrendering the policy, or maturation of the policy, is completely free from taxation for the person receiving it.
  • The benefits of this section also apply to any gains accruing out of a unit linked insurance plan (ULIP), and Single Premium Life Insurance Policies (if the aforementioned conditions are met).
  • Benefit received by a person under a keyman insurance policy (a policy in which premiums are paid by the employer and benefits are claimed by them too) are not eligible for deduction under this section.
  • Benefits received by individuals under Section 80DD(3) or 80DDA(3) of the Income Tax Act, 1961 are also not applicable for deduction from income under Section 10(10D).

Benefits of term insurance in conjunction with tax-saving benefits of Section 10(10D)

Term insurance is a type of life insurance policy that is active for a specific predetermined period. If during the continuity of this period, the policy holder dies, the benefit is paid to their nominee.

A great plan to purchase is the Bajaj Allianz term insurance available on Finserv MARKETS. With the Bajaj Allianz Life Smart Protect Goal Term Plan, you can get coverage of Rs. 1 crore at low premiums. You can also avail enhanced coverage by opting for the Critical Insurance Cover, Child Education Cover, Accidental Death Benefits or Accidental Total Permanent Disability. You can not avail tax benefits under Section 10(10D) for this particular plan, but also be eligible for deductions on the premium paid, under Section 80C.

Purchasing this policy on Finserv MARKETS comes with the added benefit of speedy settlements (with a 92% claim settlement ratio), a huge customer base (the trust of over a 100 million individuals), extensive coverage, and customizability, allowing you to tweak your plan to your pleasing.

How does section 10(10D) work?

So, now that you know about term insurance and Section 10(10D), we can use an example to understand how the tax saving benefits of Section 10(10D) play out. Let’s say Shilpa purchased a term life insurance policy from the comfort of her home on Finserv MARKETS, nominating her husband as the beneficiary. In the event of Shilpa’s death, a death benefit will be allocated, earmarked to be disbursed to Shilpa’s husband. Now, this lump sum might seem like income, but it won’t be, and hence, it shouldn’t be treated like it. Section 10(10D) ensures that the amount of money set to be received by Shilpa’s husband as death benefit will not be seen as income, and instead be exempt from the calculation of his income for purposes of taxation.

So, now that you know the tax saving benefits Section 10(10D) offers, head on over to Finserv MARKETS to purchase your term life insurance right away!

Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522