Which Tax Section Covers Term Insurance Premiums?
For Tax Year 2026-27, an eligible life-insurance premium for self, spouse or child can fall within the combined ₹1,50,000 optional-old-regime ceiling under Section 123 read with Schedule XV, the current-law equivalent of the familiar legacy Section 80C search term. Policy date, insured person, actual capital sum assured and premium-percentage conditions apply. Do not assume a premium qualifies merely because the product is called term insurance.
Is a Term Insurance Payout Taxable?
Schedule II, Table serial 2 carries the exclusion for qualifying life-policy receipts and its exceptions. A death benefit is generally treated separately from high-premium maturity restrictions, but Keyman and other statutory exclusions must still be checked. The safe answer is not “every payout is 100% tax-free”: verify the policy type, recipient, issue date and receipt before filing.
Is Return-of-Premium Term Insurance Taxable?
A return-of-premium (ROP) or maturity receipt is not automatically the same as a death benefit. Test the issue date, aggregate annual premium, capital-sum-assured condition and the applicable Schedule II exception. For a non-ULIP policy issued on or after 1 April 2023, the ₹5 lakh aggregate annual-premium rule can affect maturity exclusion; use the policy schedule and current law rather than assuming the entire return is exempt.
High-Value Policies: New Taxability Rule (Budget 2023)
For non-ULIP policies issued on or after 1 April 2023, the ₹5 lakh aggregate annual-premium rule can prevent maturity proceeds from being excluded, subject to policy selection and statutory exceptions. ULIPs have a separate ₹2.5 lakh aggregate-premium framework for policies issued on or after 1 February 2021. Amounts received on death are treated separately.
Term vs Endowment vs ULIP: Tax Comparison
Term, endowment and ULIP products serve different protection and investment purposes. Tax treatment depends on issue date, aggregate premiums, capital sum assured, receipt type and Schedule II conditions. Market-linked products also carry investment risk and charges. Do not choose cover using an unsupported universal income multiple or choose a product solely for tax treatment. Assess dependants, liabilities, duration, exclusions, claim terms, affordability and regulated product documents.
Official References
Source date: 2026-08-08. Confirm later notifications, rules and portal forms before filing or transacting.