CEO answers consumer queries: Tax benefits: Which life insurance plans can offer 80C benefits under Old Tax Regime, also secure my family's future needs?

As a salaried professional and a father of two, I am looking for a life insurance plan that not only reduces my annual tax liability but also ensures my family’s financial security. Which insurance products provide tax benefits under Section 80C while offering long-term protection and stability?

Advice by Satishwar B., MD & CEO, Bandhan Life

That’s a very wise and timely question. As a salaried individual juggling career and family, your priorities—saving tax and securing your family’s future—are both valid and deeply important. Life insurance can be a powerful tool to help you achieve both. Life insurance policies are one of the most effective ways to reduce your tax liability while also creating a financial safety net for your loved ones. 

Here’s how they help under the old tax regime:

• Section 80C: Premiums paid toward life insurance plans qualify for deductions of up to ₹1.5 lakh per annum (under Old Tax Regime only). This includes premiums for policies bought for yourself, your spouse, or your children.
• Section 10(10D): The maturity amount/death benefit/surrender value received from a life insurance policy is eligible for tax benefits subject to the conditions as per the provision of the Income Tax Act, 1961.
• Section 80D: If you choose health-related riders—such as critical illness, accidental death, or hospital cash benefits—these may offer additional tax deductions under this section (under Old Tax regime only), enhancing your overall tax savings.

In short, you’re not just protecting your family—you’re also making your money work smarter by lowering your taxable income.

Insurance plans based on your goals

Now, let’s look at two kinds of plans that serve your dual needs of protection and tax savings:

1. Term Insurance Plan

A term insurance plan is the most straightforward and essential form of life cover. It is a must-have for every family as provides large life cover at affordable premiums. The policyholder pays a fixed premium for a chosen policy term (say, 20 or 30 years), and their nominee receives the sum assured in case of their untimely death during that period.

Why it’s right for you:

• The life insurance payout acts as your income replacement. As a father, this ensures your children’s education and upbringing can continue uninterrupted.
• Premiums are affordable, which means you can get a large cover (₹1 crore or more) without straining your budget.
• Eligible for tax benefits under Sections 80C (under Old Tax regime Only) and 10(10D) subject to the conditions as per the provision of the Income Tax Act, 1961. Every household with dependents should have a term plan in place—it’s your first line of defence in financial planning.

You can use the term insurance calculator on bandhanlife.com to calculate your term cover.

2. Guaranteed Savings Plan

If you're looking for a plan that not only offers life cover but also returns your investment in the form of guaranteed payouts, this one’s for you.
These plans usually provide:

• Regular tax freecash benefits under Section 10(10D) subject to the conditions as per the provision of the Income Tax Act, 1961, at pre-decided intervals.
• A maturity amount that is eligible for tax benefits under Section 10(10D) subject to the conditions as per the provision of the Income Tax Act, 1961.
• A predictable income stream, ideal for supplementing household expenses, funding school fees, or saving for future goals.

Compared to traditional savings instruments like bank fixed deposits (where interest earned is taxable), guaranteed savings plans are more tax-efficient and goal-focused.

3. Child Plan

These are traditional life insurance plans which aims to support you in planning for financial security for your child. They usually provide you lumpsum amount at maturity as per your requirement, the amount which could be used for pre-defined goal of your child. In case,of the unfortunate death of the policyholder during the policy term, these plans pay premiums to the nominees on their behalf to secure the finances for the defined goal.

4. Unit Linked Insurance Plans (ULIPs) 

If you are looking to grow your wealth and are comfortable with fluctuation in returns, you can also opt for ULIPs. ULIPs will give you market-linked returns along with a robust life cover that will help you fulfil your long-term goals, like retirement or your child’s education. 

Not only will you get a tax rebate on the premiums paid under Section 80C, you will also get tax free maturity benefit under Section 10 (10D) if your premium is less than ₹2.5 Lakh in a year (subject to certain conditions). Remember: to get the best out of your ULIP, stay invested for a long period of time; keep monitoring your fund performance and switch your fund if necessary.

*ULIP maturity is tax-free only if annual premium is less than ₹2.5 lakh as per Section 10(10D).

* All tax benefits apply under the Old Tax Regime.

Things to note 

While tax savings are a welcome bonus, your primary motivation for buying life insurance should always be your family’s long-term well-being. Here are a few tips:

• Assess your needs holistically. A good life cover is generally 10–15 times your current annual income. Don’t forget to factor in outstanding loans, children’s higher education costs, and long-term household expenses.
• Don’t choose a policy just for Section 80C benefits. While insurance is a smart tax-saving tool, so are other expenses like children’s tuition fees or contributions to PPF and EPF. What makes insurance stand out is the financial protection it offers.
• Choose a reliable insurer. Look for features like paperless onboarding, transparent processes, affordable premiums, and a high claim settlement ratio. This ensures your family won’t face any hurdles in receiving the benefit when they need it most.

Major takeaways

Life insurance isn’t just about tax deductions—it’s about safeguarding your family’s future dreams and stability. With the right plan, you’re doing more than saving on taxes; you’re building a foundation of financial security that your loved ones can rely on.

Whether you opt for a term plan to ensure large, affordable protection or a guaranteed income plan to blend stability with returns, your decision today will bring lasting peace of mind for tomorrow. By putting your family’s financial security on a priority, you are definitely on the right track. Do consult a financial advisor for further guidance.