- Corporate salaried employees face changes in tax-saving insurance under the new regime
- Old regime offers deductions under Sections 80C and 80D; new regime mostly excludes these benefits
- Experts call for prioritising insurance protection and wealth planning over tax-driven choices now
For corporate salaried employees, the landscape of tax-saving insurance and related financial products has changed materially, with the shift to the new tax regime under Section 115BAC of the Income Tax Act.
Under the old tax regime, instruments such as life/term insurance, health policies, and Unit Linked Insurance Plans (ULIPs) offered tangible deductions under Sections 80C (up to Rs 1.5 lakh) and 80D (Rs 25,000-Rs 50,000), reducing taxable income and lowering tax liability. However, under the new regime, most of these deductions are not available; the focus shifts to choosing the regime that best suits an individual's situation and making insurance choices based on protection and long-term planning rather than just tax.
Expert Voices on Tax-Saving Insurance:-
Abhishek Bhilwaria, AMFI Registered MFD: Under the new tax regime, traditional insurance vehicles no longer act as tax arbitrage instruments. Instead, tax efficiency now comes more at exit (e.g., Section 10(10D) benefits) than during contribution. Planning must align with protection adequacy and wealth transfer goals.
Pranav Koomar, Founder & CEO, PlusCash: Tax planning should be systematic. Overreliance on traditional insurance for last-minute tax savings should be replaced with planned allocation to Employees' Provident Fund (EPF), National Pension System (80CCD(1B)), and equity linked instruments.
Senthil Kumar R, MD & CEO, Nitstone Finserv: Effective tax-saving for salaried persons combines insurance protection (term, health) with wealth creation. Balanced allocations across products, including NPS and Equity Linked Savings Schemes (ELSS), yield both protection and potential tax efficiency.
Siddharth Maurya, MD, Vibhavangal Anukulkara Pvt Ltd: Insurance must be chosen for coverage first and tax benefit second. Term life and health policies provide both protection and deductions under 80C/80D (in the old regime), while ULIPs suit risk-tolerant investors seeking market-linked growth.
Tax Mechanism Snapshot: Old vs New Regime
| Feature / Deduction | Old Tax Regime | New Tax Regime (Default) |
| Standard Deduction (Salaried) | Rs 50,000 | Rs 75,000 |
| Section 80C (Life Insurance Premiums, ELSS, etc.) | Available (up to Rs 1.5 lakh) | Not available |
| Section 80D (Health Insurance Premiums) | Available (Rs 25K-Rs 50K) | Not available |
| Other perquisites (HRA, home loan interest) | Available | Not available |
Strategic Planning for Insurance & Tax
1. Life/Term Insurance
Protection first: Ensures family's financial security.
Tax Edge: Old regime allows deduction under Section 80C; maturity/death benefits exempt under Section 10(10D).
2. Health Insurance
Protection vs escalating medical costs.
Tax Edge: Deductions under Section 80D (old regime) for premiums paid for self/family and parents.
3. Unit Linked Insurance Plans (ULIPs)
Dual nature: Offers protection + market-linked growth.
Tax Edge: Old regime allows Section 80C deduction; maturity benefits under Section 10(10D). Requires risk tolerance.
Relation Between Salary & Tax Vehicle Planning
Here's a simplified remuneration-centric look at typical EMI, insurance premium, and tax benefit overlap - useful when deciding whether to opt for old or new regime and how to distribute insurance budgets.
| Annual Salary (Rs lakh) | Monthly EMI / Premium (Life + Health) | Estimated Annual Tax Benefit (Old Regime) | Likely Optimal Tax Regime |
| 6-8 | Rs 2,000-Rs 4,000 | Rs 20,000-Rs 30,000 | New regime often better (low tax + minimal deductions) |
| 8-12 | Rs 4,000-Rs 7,000 | Rs 30,000-Rs 50,000 | Old regime if 80C + 80D fully utilised |
| 12-18 | Rs 7,000-Rs 12,000 | Rs 50,000-Rs 90,000 | Old regime likely beneficial with structured 80C/80D |
| 18+ | Rs 12,000-Rs 20,000+ | Rs 90,000+ | Old regime as deductions grow larger - also consider NPS(80CCD1B) |
(Actual premiums and EMIs may vary based on age, coverage, risk profile, and underwriting.)
Which Regime To Go For -- Old Or New
- If deductions (80C + 80D + others) exceed Rs 3.5-4 lakh per year, old regime usually yields lower net tax.
- If deductions are modest and you prefer simplicity, the new regime with lower base rates and higher standard deduction may be more advantageous.
Flexibility: Taxpayers can switch between regimes each year to maximise benefit when filing ITR.
