What are the tax benefits applicable to me if I invest in a life insurance policy?

Buying life insurance policies makes you eligible for income tax deduction for premium paid and income tax exemption for insurance benefits received.

Life insurance premiums up to 10% of sum assured can be claimed for deduction under section 80 C. Tax benefits will be reversed if policy is surrendered before 2 years in case of traditional policies and 5 years in case of ULIPs. Premiums on pension/annuity plans can also be deducted under section 80 CCC. Total deduction allowed under sections 80 C and 80 CCC is Rs 1 lakh.

Death benefit or maturity benefit received from life insurance policies is exempt from income tax under section 10(10)D. Here also the condition that premium should not have exceeded 10% of sum assured (bonuses excluded) throughout the policy term holds.

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