Increasing Term Life Insurance Tax Benefits: Sections 80C, 80D, and 10(10D) Explained

Increasing term life insurance is a type of term plan that offers both financial protection and tax advantages. This article breaks down the key tax benefits you can claim on increasing term insurance. This includes key sections like 80C, 80D, and 10(10D) on insurance premiums and deduction limits.

Increasing term life insurance is a type of term plan that offers both...

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What Is an Increasing Term Life Insurance Plan?

An increasing term life insurance plan is a type of term policy where the sum assured grows every year. The increase is usually by a fixed percentage or as per a set schedule. This helps your coverage keep up with inflation.

The premium often stays the same, even as the cover rises. It is useful for young earners or families whose expenses may increase over time. These plans also offer tax benefits under Sections 80C and 10(10D).

Example

A 30-year-old buys a term insurance plan with a base sum assured of ₹50 lakh. The policy offers a 10% annual increase on the base amount.

The cover increases by ₹5 lakh every year (i.e., 10% of ₹50 lakh).
In the 2nd year, the sum assured becomes ₹55 lakh.
In the 3rd year, it increases to ₹60 lakh- all while the premium stays fixed throughout the policy term.

Increasing Term Life Insurance Tax Benefits Explained

Here's a quick look at how different parts of your increasing term plan qualify for tax benefits under key sections of the Income Tax Act:

Tax Benefits Under Section 80C

One of the most commonly utilised sections by Indian taxpayers is Section 80C of the Income Tax Act. Term insurance premiums qualify for a deduction under this section, with a maximum limit of ₹1.5 lakh per annum.

Benefits Under Section 80D: A Hidden Advantage

Many policyholders overlook the 80D deduction limit, assuming it applies only to health insurance. But if you have opted for health riders like Critical Illness Cover, then you are eligible for an extra deduction under Section 80D, in addition to the 80C benefits.

Section 10(10D): Tax-Free Payouts on Death

One of the biggest tax advantages of term insurance is that the death benefit received by the nominee is completely tax-free under Section 10(10D) of the Income Tax Act.

Note: Pure term insurance plans do not offer a maturity benefit. However, return-of-premium variants may provide a refund of premiums at maturity.

Section	What It Covers	Key Conditions	Benefit

Section 80C	Tax deduction for base term insurance premiums	Premium should not exceed 10% of the sum assured (for policies issued after April 1, 2012)	Up to ₹1.5 lakh deduction per year for self, spouse, and children
Section 80D	Tax deduction for health-related riders (e.g. Critical Illness, Surgical Care, etc.)	Rider must be health-related	₹25,000 deduction (below 60), ₹50,000 (above 60). Extra if covering parents
Section 10(10D)	Tax exemption on the death benefit from the policy	Premium should not exceed 10% of the sum assured (for policies issued after April 1, 2012)	The entire payout is tax-free. No upper limit. No TDS if conditions are met
80C vs. 80D	Clarifies tax treatment of base plan vs. riders	Base plan under 80C; health riders under 80D	Allows dual tax-saving if both base and health riders are included

Real-Life Scenario: Maximising Benefits

Let’s say Raj, a 30-year-old professional, purchases an increasing term insurance policy with:

₹1 crore sum assured
₹10,000 annual premium
Critical illness rider of ₹2,000 premium

He claims:

₹10,000 under Section 80C
₹2,000 under Section 80D

On unfortunate demise, his nominee receives ₹1 crore, fully exempt under Section 10(10D). Thus, he secures his family while saving tax every year.

Why Opt for Increasing Term Plans?

Choosing an increasing term plan over a level-term one has several benefits:

Protection against inflation

As the cost of living rises, so does your insurance cover.

Long-term tax efficiency

Helps you maximise tax savings under Section 80C for many years.

Health riders for extra tax perks

By opting for riders, you can take advantage of the 80D maximum limits.

No compromise on payouts

With Section 10(10D) benefits, the entire payout remains tax-free.

Overlooked Tax Planning Opportunity

Increasing term insurance plans are often not recognised for their role in effective tax planning. Many salaried individuals face the pressure of making quick tax-saving decisions toward the end of the financial year. In such moments, it's easy to choose products that may not align with long-term goals.

A well-chosen increasing term plan offers more than just protection; it provides reliable tax benefits every year. By planning ahead, individuals can ease this financial stress and ensure their loved ones are safeguarded through a thoughtful, long-term solution.

Conclusion

Increasing term life insurance tax benefits provide dual advantages: life protection and tax efficiency. By understanding which components fall under Section 80C, 80D, and 10(10D), you can significantly lower your tax liability while securing your family’s financial future. With strategic planning, riders, and correct policy selection, you can maximise both your term plan tax benefit and long-term savings.

FAQs on Increasing Term Life Insurance Tax Benefits

1. Term insurance comes under which section 80C or 80D of the Income Tax?

Term insurance premiums are tax-deductible under Section 80C for basic life coverage. If you add health-related riders like Critical Illness or Surgical Care, those premiums qualify for a deduction under Section 80D

2. Can I claim tax benefits under both Section 80C and 80D for the same policy?

Yes, the base premium qualifies under Section 80C and the rider premium under Section 80D.

3. What is Section 10(10D) in insurance?

Section 10(10D) provides tax exemption on the maturity or death benefit payout from a life insurance policy, subject to certain conditions.

4. Is there a TDS on the insurance premium?

No, TDS does not apply to life insurance premium payments.

5. What is the 80D maximum limit for tax deductions?

Under Section 80D, the maximum deduction is: ₹25,000 for individuals under 60. For senior citizens, it is ₹50,000.

6. Do all increasing term plans offer Section 80D benefits?

No. You can only claim a deduction in Section 80D when your plan includes health riders such as critical illness and surgical care.

7. Is increasing term insurance better than level term insurance for tax benefits?

From a tax perspective, both plans offer similar deductions under Section 80C.

Written by Neviya Laishram

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Reviewed by Vaibhav Kumar Kaushik

A senior editor with years of expertise, she fine-tunes content that connects, converts, and builds trust. She transforms heavy life insurance concepts into clear, aha-moment reads. Writing is her passion, and thinking ahead is second nature. When not wrangling words, she’s crushing game levels because every challenge is a puzzle waiting to be solved.