Life Insurance and Health Insurance Benefits Through an HUF
- Pritish Sahoo
- 20 hours ago
- 11 min read
Hindu Undivided Families (HUFs) are treated as separate taxable entities under the Income Tax Act, 1961. This structure allows families to plan taxes differently from individual taxpayers. One important advantage involves insurance-based tax planning. Life insurance and health insurance policies purchased by an HUF for its members may qualify for deductions and exemptions under specific provisions of the Income Tax Act. These benefits depend on factors such as the applicable tax regime, premium limits, and policy conditions. Understanding how these provisions work helps families structure insurance planning more efficiently while staying compliant with tax rules.
Life insurance and health insurance benefits through an HUF arise because the HUF is taxed separately from its members. Premiums paid by the HUF for life insurance policies may qualify for deductions under Section 80C, while health insurance premiums for members may qualify under Section 80D in the old tax regime. In addition, maturity proceeds from qualifying life insurance policies may remain tax-free under Section 10(10D), subject to certain conditions. These provisions allow an HUF to combine insurance protection with tax planning while using its own tax slabs.
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How Life Insurance and Health Insurance Benefits Through an HUF Work
An HUF operates as a separate taxpayer with its own Permanent Account Number (PAN) and tax return. Because of this independent status, it can purchase insurance policies for its members and claim deductions for the premiums paid.
When the HUF pays life insurance or health insurance premiums from its own funds, these payments can qualify for tax deductions under specific provisions of the Income Tax Act. The deduction is claimed in the HUF’s income tax return rather than the personal return of the members.
This structure creates two major advantages:
Insurance protection for family members.
Additional tax deductions are separate from those of individual taxpayers.
However, these deductions are available only when the HUF opts for the old tax regime.
What Is an HUF Under Income Tax Laws
A Hindu Undivided Family is a legal and tax entity formed automatically in Hindu families consisting of lineal descendants from a common ancestor.
The HUF generally includes:
Karta (head of the family)
Coparceners (sons and daughters with birth rights)
Other family members
The Karta manages the financial and legal matters of the HUF. The entity can own property, operate bank accounts, invest funds, and file income tax returns.
Under the Income Tax Act, an HUF is taxed separately from its members. This allows income earned by the HUF to be taxed independently using its own slab rates.
Why Insurance Planning Through an HUF Can Be Tax Efficient
Insurance planning through an HUF can reduce the overall tax burden of a family because deductions are available in addition to those claimed by individuals.
For example:
Individual members may claim deductions in their personal returns.
The HUF may claim separate deductions for premiums paid from HUF funds.
This separation allows families to spread insurance investments across multiple tax entities.
As a result, the HUF structure is commonly used for long-term tax planning, wealth management, and insurance protection.
Life Insurance Benefits Through an HUF
Life insurance policies purchased by an HUF for its members can provide both financial protection and tax advantages.
If the HUF pays the premium from its own funds, the payment may qualify for deduction under Section 80C in the old tax regime. The maximum deduction allowed is ₹1.5 lakh in a financial year.
Additionally, maturity proceeds and death benefits may qualify for tax exemption under Section 10(10D), provided certain conditions are satisfied.
Section 80C Deduction for Life Insurance Premiums Paid by an HUF
Under Section 80C of the Income Tax Act, the HUF can claim a deduction for life insurance premiums paid for its members.
The deduction is subject to the following limits:
Maximum deduction: ₹1.5 lakh per financial year
Premium must be paid from HUF funds
The policy must be issued for members of the HUF
This deduction reduces the taxable income of the HUF.
However, the premium amount should not exceed 10% of the sum assured for policies issued after 1 April 2012.
Tax Exemption on Life Insurance Maturity Under Section 10(10D)
Section 10(10D) provides tax exemption for maturity proceeds and death benefits received from qualifying life insurance policies.
For HUF policies, this exemption applies when:
Premium does not exceed 10% of the sum assured
The policy meets conditions prescribed under the Income Tax Act
If these conditions are satisfied, the maturity amount received by the HUF remains completely tax-free.
Death benefits received by nominees remain exempt regardless of premium limits.
Is Life Insurance Deduction Allowed in the New Tax Regime
The new tax regime introduced under Section 115BAC does not allow deductions under Section 80C.
Therefore, life insurance premium deductions claimed by an HUF are not available if the HUF opts for the new tax regime.
However, the new regime provides lower tax rates and higher rebate benefits. For example, recent updates increased the rebate under Section 87A, making income up to ₹12 lakh effectively tax-free in many cases.
Families must evaluate whether deductions under the old regime provide greater tax savings compared to the lower tax rates under the new regime.
How Life Insurance Benefits Through an HUF Work in the Old Tax Regime
The old tax regime allows deductions and exemptions that can significantly reduce taxable income.
Under this regime:
Life insurance premiums qualify for a deduction under Section 80C
Maturity proceeds may remain tax-free under Section 10(10D)
For HUFs with multiple insurance policies or long-term investments, the old regime often provides better tax planning opportunities.
The choice between tax regimes should be evaluated each financial year based on income levels and available deductions.
Health Insurance Benefits Through an HUF
Health insurance policies purchased by an HUF for its members may qualify for deductions under Section 80D.
These deductions encourage families to maintain medical insurance coverage while reducing taxable income.
The deduction is available when the premium is paid from the HUF account and the policy covers members of the HUF.
Section 80D Deduction for Health Insurance Premiums Paid by an HUF
Section 80D allows HUFs to claim deductions for medical insurance premiums paid for members.
The deduction limits are:
₹25,000 for members below 60 years
₹50,000 if the insured member is a senior citizen
These limits apply to the total premium paid by the HUF for eligible members.
The deduction must be claimed in the HUF’s income tax return.
Preventive Health Check-up Deduction Under Section 80D
Preventive health check-ups are also eligible for deduction under Section 80D.
The deduction allowed is:
Up to ₹5,000 per financial year
This amount is included within the overall Section 80D limit and is not an additional deduction.
Payments for preventive check-ups may be made in cash, unlike insurance premiums, which must generally be paid through non-cash modes.
Is Health Insurance Deduction Allowed in the New Tax Regime
Health insurance deductions under Section 80D are not available in the new tax regime.
This means an HUF opting for the new regime cannot claim deductions for medical insurance premiums.
Families that rely heavily on insurance deductions often prefer the old regime because it allows both life and health insurance deductions.
How Health Insurance Benefits Through an HUF Work in the Old Tax Regime
In the old tax regime, HUFs can claim deductions under Section 80D for health insurance premiums.
This deduction helps reduce the taxable income of the HUF while ensuring that family members remain protected against medical expenses.
When combined with life insurance deductions under Section 80C, the HUF structure can significantly improve overall tax efficiency.
Who Can Be Covered Under HUF Life and Health Insurance Policies
Insurance policies purchased by the HUF can cover members of the family.
These members may include:
Karta of the HUF
Coparceners such as sons and daughters
Other dependent members
After the Hindu Succession (Amendment) Act, 2005, daughters also have equal coparcenary rights. Therefore, insurance premiums paid for daughters can also qualify for deductions.
Conditions for Claiming Insurance Deductions Through an HUF
Certain conditions must be satisfied to claim deductions.
Key requirements include:
Premium must be paid from the HUF bank account
The policy must cover members of the HUF
Payments should be properly documented
The deduction must be claimed in the HUF income tax return
Maintaining proper documentation is essential for tax compliance.
How to Open an HUF Bank Account for Insurance Premium Payments
A dedicated bank account is required to manage HUF finances.
The process usually involves the following steps:
Apply for a PAN card for the HUF
Prepare an HUF declaration or deed
Submit documents to the bank
Open the account under the name of the HUF
The Karta generally operates the account and authorises financial transactions.
Documents Required to Open an HUF Bank Account
Banks usually require the following documents:
HUF PAN card
HUF declaration deed
Identity proof of the Karta
Address proof of the Karta
Passport-size photographs
Cancelled cheque or bank introduction
Once the account is opened, insurance premiums can be paid directly from the HUF account.
Recent Tax Updates Affecting HUF Insurance Benefits for FY 2025–26
Recent tax changes have affected the comparison between the old and new tax regimes.
For FY 2025-26:
The new regime increased the basic exemption limit for HUFs to ₹4 lakh.
Rebate under Section 87A may make income up to ₹12 lakh effectively tax-free.
However, deductions under Sections 80C and 80D remain unavailable in the new regime.
Another update affects ULIP policies where annual premiums exceed ₹2.5 lakh. Gains from such policies may be taxed as capital gains.
Traditional life insurance policies that meet Section 10(10D) conditions remain tax-exempt.
Common Mistakes While Claiming Insurance Deductions Through an HUF
Some common mistakes include:
Paying premiums from personal accounts instead of the HUF account
Claiming deductions in the individual return instead of the HUF return
Exceeding premium limits relative to the sum assured
Missing documentation for insurance payments
Such errors can lead to the denial of deductions during tax assessments.
How Digital Tax Platforms Simplify HUF Insurance Deduction Reporting
Managing HUF deductions manually can sometimes become complex.
Digital tax platforms simplify this process by:
Organizing financial records
Tracking deductions automatically
Guiding users through HUF tax return filing
Reducing errors in deduction claims
Platforms such as TaxBuddy provide structured tools that help taxpayers correctly report insurance deductions while filing HUF income tax returns.
Conclusion
Insurance planning through an HUF provides both financial protection and tax advantages when structured properly. Life insurance premiums can qualify for deductions under Section 80C, while health insurance premiums may qualify under Section 80D when the old tax regime is chosen. Additionally, maturity proceeds from qualifying policies may remain tax-exempt under Section 10(10D). These benefits make HUFs a useful structure for families seeking organized tax planning and long-term financial protection. For anyone looking for assistance in tax filing or managing HUF-related deductions, it is worth considering reliable digital platforms. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Can an HUF claim deductions for both life insurance and health insurance in the same financial year?
Yes. An HUF can claim deductions for life insurance premiums under Section 80C and health insurance premiums under Section 80D in the same financial year. However, these deductions are available only when the HUF opts for the old tax regime. Section 80C allows deductions up to ₹1.5 lakh for eligible investments, including life insurance premiums. Section 80D allows deductions for health insurance premiums depending on the age of the insured members.
Q2. Who can be insured under life or health insurance policies purchased by an HUF?
Insurance policies purchased by an HUF can cover members of the family. These generally include the Karta, coparceners such as sons and daughters, and other dependent members. Since daughters are recognized as coparceners under the Hindu Succession (Amendment) Act, 2005, insurance premiums paid for their policies can also qualify for tax deductions.
Q3. What is the maximum deduction available for life insurance premiums paid by an HUF?
Under Section 80C, an HUF can claim a deduction of up to ₹1.5 lakh per financial year for life insurance premiums paid for its members. The premium must be paid from the HUF’s funds and the policy must be taken in the name of a member of the HUF.
Q4. What conditions must be satisfied for life insurance maturity proceeds to remain tax-free?
Life insurance maturity proceeds received by an HUF can remain tax-free under Section 10(10D) if certain conditions are satisfied. One important condition is that the premium paid in any year should not exceed 10% of the sum assured for policies issued after April 1, 2012. If this condition is met, the maturity amount is exempt from tax.
Q5. Are death benefits from life insurance policies taxable in the hands of an HUF?
No. Death benefits received from a life insurance policy remain tax-exempt under Section 10(10D). This exemption applies regardless of the premium-to-sum-assured ratio that may apply to maturity proceeds.
Q6. What is the deduction limit for health insurance premiums paid by an HUF?
Under Section 80D, an HUF can claim a deduction of up to ₹25,000 for health insurance premiums paid for members below 60 years of age. If the insured member is a senior citizen, the deduction limit increases to ₹50,000. These deductions are available only under the old tax regime.
Q7. Can preventive health check-ups be claimed by an HUF under Section 80D?
Yes. Preventive health check-ups for members of the HUF can be claimed as a deduction under Section 80D up to ₹5,000 in a financial year. This amount is included within the overall Section 80D limit and is not an additional deduction.
Q8. Are insurance deductions available to an HUF under the new tax regime?
No. Deductions under Sections 80C and 80D are not available if the HUF opts for the new tax regime. The new regime offers lower tax rates but removes many deductions and exemptions that are otherwise available in the old regime.
Q9. Why is a separate HUF bank account necessary for insurance deductions?
A separate HUF bank account is necessary because insurance premiums must be paid from the HUF’s funds in order to claim deductions in the HUF’s tax return. If premiums are paid from an individual member’s account, the deduction may not be allowed for the HUF.
Q10. What documents are required to open an HUF bank account for insurance payments?
Opening an HUF bank account usually requires the HUF PAN card, an HUF declaration or deed, identity and address proof of the Karta, passport-size photographs, and bank verification documents such as a cancelled cheque. Once the account is opened, insurance premiums can be paid directly from the HUF account.
Q11. Can an HUF claim deductions for multiple insurance policies?
Yes. An HUF can claim deductions for multiple insurance policies covering different members of the family. However, the combined deduction under Section 80C cannot exceed ₹1.5 lakh in a financial year, and Section 80D deductions must remain within their respective limits.
Q12. Why is insurance planning through an HUF useful for tax planning?
Insurance planning through an HUF can improve overall tax efficiency because the HUF is taxed separately from individual members. This allows families to claim deductions for insurance premiums in the HUF’s tax return in addition to deductions claimed by individuals in their own returns, thereby optimizing the overall tax liability of the family.
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