Can You Claim Tax Deduction if Life Insurance Premium Is Paid by Family?

2025-04-24

328 Views

6 minutes read

Locate branch

Resume journey

Pay Premium

Live Life More Confidently

Get best insurance from our experts

Name is required Name should be Valid

Mobile Number is required Mobile Number should be Valid

Email is required Email should be Valid

DOB is required DOB should be Valid

Annual Income*

< 3 3-5 5-7 7-10 > 10

Annual Income is required

I agree that even if my contact number is registered with NDNC / NCPR, I would still want the Company to contact me on the given number and email id for the clarifications/product information sought by me and agree that I have read and understood the Privacy Policy and agree to abide by the same.

Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

Let’s face it, doing your taxes in India is like playing a never-ending game of chess. You're hoping to play the right moves, protect your king (your savings), and not checkmate (pay a large tax bill). One of the most reliable knights on this board? Life insurance.

However, what if someone else, a parent, spouse, or brother or sister, pays your life insurance premium? Can you claim the tax deduction?

That's what this blog is here to demystify. Amidst the maze of tax slabs in India and the constantly changing tax regulations, clarity is of the essence, particularly with regard to something as useful as life insurance tax benefits. We'll take it apart, rule by rule, with everyday examples and real-world applications so that you can file your returns with confidence and perhaps even give your CA a scare.

Key Takeaways

Premiums paid by another person for your policy usually don't entitle you to tax benefits.
To be eligible for deductions under Section 80C, you must be both the policyholder and the premium payer.
You can pay for your spouse's or children's policies, but not for siblings or parents.
Tax planning using life insurance can enable you to move into lower tax brackets India if used tactfully.
Review your documentation and payment details each year to ensure you continue receiving eligible tax deductions under Section 80C.

Understanding Section 80C and Who Can Claim Deductions

The Income Tax Act of 1961 Section 80C is your Swiss army knife for tax savings. It allows deductions for certain investments and costs up to Rs. 1.5 lakh in a fiscal year. And which of these is the most sought after? Premiums for life insurance.

But here's the catch. You have to be the payer. You can deduct premiums on only policies under which you are the person insured or paying for your spouse or children. If your name isn't mentioned in the payment transaction or if you are not the policyholder, the deduction is disallowed.

Did You Know?

Parental life insurance premiums are not deductible from taxes under Section 80C.

Source: Cleartax

What Happens if a Family Member Pays the Premium?

Say your dad pays your life insurance premium through his bank account. The policy is in your name. Can anybody claim the deduction?

Answer is ‘No’. Neither of you qualifies. Your dad isn't the policyholder. You didn't pay. The tax deduction disappears.

Tax law places a strong emphasis on payment sources. Unless the premium is deducted from your own taxable income, it will not qualify for deductions.

Exceptions You Should Know

Yes, there are always exceptions to the rule, especially in tax law:

If you're part of a Hindu Undivided Family (HUF), the Karta can pay a premium for any member and avail deductions.
On joint life insurance policies, the paying premium member can take the deduction.
Payments for siblings, parents, or friends -even if you're feeling generous - don't fit the bill under Section 80C.

How Does This Impact Your Tax Bracket in India?

This is where it gets interesting. Indian tax brackets are progressive. Your deductions might push you into a lower bracket, so you pay a smaller rate of your income in taxes.

Let's see: Let's say you have a salary of Rs. 8 lakhs a year. After investing Rs. 1.5 lakhs in tax-saving 80C investments such as life insurance, your income for tax purposes goes down to Rs. 6.5 lakhs. In the old regime, this saved you thousands of rupees in taxes.

If another person pays your premium, the deduction vanishes, and you land in the higher tax slab. Now that would be very upsetting.

Maximize Your Tax Savings - Talk to an Expert

Full Name* Please enter correct name Please enter the Full name

Mobile Number* Please enter valid mobile number Please enter Mobile Number

Email* Please enter valid email Please enter Email

...Read more Consent is required

Documentation You Need to Support Your Claim

Deductions on taxes are not subject to intent, they are evidence-based. Ensure that you possess the receipt with your name as the policyholder as well as payer, pay via your bank account, UPI, or credit card, and keep a soft or hard copy of the premium certificate.

If unsure, have your insurer issue new documents that bear the proper details. Better safe than facing a tax notice.

Can You Reimburse the Family Member and Still Claim?

Let’s say your brother paid the premium and you reimbursed him later. Does that make you eligible?

No. The Income Tax Department recognises the person who made the actual payment as the payer. Reimbursements don’t count.

To keep things tax-friendly, transfer funds to your family member before they pay on your behalf, or better, make the payment directly.

What About Group Life Insurance Provided by Employers?

Group life insurance coverage is provided by many employers. You are eligible to make a claim under Section 80C if the premium is withheld from your paycheck.

You cannot claim the benefit, though, if your company pays for it in full without taking any money out of your salary.

For clarification, always check your payslip and the Form 16 that was provided by your company.

Pro Tips to Maximise Life Insurance Tax Benefits

Link your primary bank account to your premium payments. This keeps the payment trail clear. Also:

Pay by March 31 to receive the deduction for the current year.
Set up automatic payments to prevent missing deadlines.
Select long-term policies to remain consistently qualified.

Being proactive results in fewer surprises come tax time.

Conclusion

In terms of tax advantages, life insurance is an investment rather than a policy. However, the rule is straightforward: you cannot make a claim if you do not pay out of pocket.

Rather than forgoing precious deductions, get ahead. Use your earnings to pay for policies that fit within your financial plans and keep all documents accurate and in hand.

Insurances such as Canara HSBC Life Insurance makes it simpler through well-planned schemes that intertwine wealth accumulation, family safety, and tax effectiveness. Digital payment modes and tax vouchers allow your investment to become hassle-free, strategic, and seamless.

Intelligent taxpayers don't earn alone, they plan, pay, and thrive!

Glossary

Section 80C: Provides deductions of up to ₹1.5 lakh for qualified investments, such as PPF, ELSS, and life insurance, among others.
Life Insurance Premium: The regular payment made by the policyholder to keep their insurance policy active and in force.
Tax Brackets India: Government-defined income ranges that determine how much tax you owe, based on your total taxable income.
Policyholder: The person who holds the insurance policy and is in charge of making premium payments is known as the policyholder.
Group Life Insurance: An employer-sponsored life insurance policy that covers a group of people under one contract.

FAQs

Yes, as per Section 80C of the Income Tax Act, you can claim tax deductions on life insurance premiums paid for your son, irrespective of whether he is dependent on you or not. This facility is available for both minor and major children, as long as the payment is made out of your own taxable income and the policy is in your name as the proposer.

No, premiums paid on life insurance policies of parents—dependent or not—are not eligible for tax deduction under Section 80C. Only self, spouse, and children are covered by the section. Policies under Section 80D (health insurance) can be claimed for parents.

No, LIC premiums or any other life insurance premiums paid for your parents are not deductible under Section 80C. Only payments made for your own, spouse’s, or children's life insurance are considered valid for the purpose of tax deductions.

Yes, but on one condition: the wife should have paid the premium herself out of her own taxable income, and the policy should be in the husband's name. Then she can claim a deduction under Section 80C. If the husband pays the premium, the wife cannot claim the deduction.

Yes, if you are paying the premium of a policy in which your wife is the life, you are also entitled to a deduction under Section 80C. Just see that you are paying the amount from your income and maintaining proper documents to substantiate your claim.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

What is Section 54EC of Income Tax Act? | Exemption on Capital Gains

Are Life Insurance Tax Benefits Affected When You Switch to Freelancing?

Tax Savings - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.