The new tax regime is now the default for salaried employees in India. But does that mean insurance and LIC policies no longer help with taxes? Not entirely — here is what still works.

Note: This article is general information from an independent insurance advisor, not official insurer material. Plan names, premiums, and benefits are illustrative only — actual terms depend on underwriting, age, and current product rules. Bonuses on participating plans are not guaranteed. Please read the policy document and consult us before buying.

The Union Budget 2025-26 made the new tax regime the default option for all salaried individuals. For many people in Chennai and across India, this raises an immediate question: if I can no longer claim 80C and 80D deductions, why should I buy insurance or LIC policies for tax purposes?

The short answer is: you should still buy them — but for protection and savings, not just for tax benefits. That said, there are still some tax advantages available even under the new regime. Let us break it all down clearly.

Old Regime vs New Regime — A Quick Comparison

Feature	Old Tax Regime	New Tax Regime
Tax slabs	Higher rates, more brackets	Lower, simplified rates
Standard deduction	₹50,000	₹75,000 (Budget 2024)
Section 80C (LIC, PPF, ELSS)	Up to ₹1.5 lakh deduction	Not available
Section 80D (Health insurance)	Up to ₹25,000–₹50,000	Not available
HRA exemption	Available	Not available
Leave travel allowance	Available	Not available
Employer NPS (80CCD(2))	Available	Still available
Default from FY 2025-26	No	Yes

The new regime has lower tax slabs but removes most deductions. For many middle-income earners who were not fully utilising 80C and 80D anyway, the new regime results in lower tax outgo.

What Is No Longer Deductible Under the New Regime

Under the new tax regime, you cannot claim:

Section 80C — LIC premium payments, PPF, ELSS mutual funds, NSC, home loan principal, children's tuition fees
Section 80D — Premiums paid for health insurance (self, spouse, children, parents)
Section 80CCC — Contributions to pension plans and annuity policies
Section 24(b) — Interest on home loans (for self-occupied property)

This affects people who previously bought LIC policies or health insurance primarily to reduce their taxable income.

What Still Works Under the New Regime

Not everything is lost. Here are the tax advantages that survive in the new regime:

1. Employer NPS Contribution — Section 80CCD(2)

If your employer contributes to your National Pension System (NPS) account, that contribution is deductible even under the new regime — up to 10% of your basic salary + DA. This is one of the most valuable remaining deductions and is often overlooked by employees.

Action: Ask your HR department to route a portion of your CTC through employer NPS.

2. Employer-Paid Group Insurance Premiums

If your company pays for your group health or group life insurance, those premiums are not added to your taxable income. The benefit is yours — cost is borne by the employer — and it is entirely tax-neutral for you as an employee.

3. Tax-Free Maturity on Life Insurance — Section 10(10D)

Maturity proceeds from life insurance policies (including LIC endowment and money-back plans) are tax-free under Section 10(10D), provided the premium does not exceed 10% of the sum assured. This holds under both old and new regimes.

This means if your LIC policy matures, you receive the full amount without any tax deduction — regardless of which tax regime you are in.

4. Death Benefit — Always Tax-Free

Life insurance death benefits are fully exempt from income tax under Section 10(10D) in both regimes. This is a fundamental protection benefit that is never affected by regime changes.

5. ULIPs — Partial Tax Efficiency

Unit Linked Insurance Plans (ULIPs) with an annual premium below ₹2.5 lakh continue to offer tax-free returns at maturity under Section 10(10D) in the new regime.

Who Should Still Consider the Old Regime

The old regime may still be better for you if:

You are already maximising 80C investments (LIC + PPF + ELSS = ₹1.5 lakh)
You are paying significant health insurance premiums (self + parents = up to ₹75,000 under 80D)
You have a home loan with high interest outgo (Section 24b deduction of ₹2 lakh)
You are a senior citizen with high medical expenses

Simple rule: If your total deductions under the old regime exceed ₹3–3.5 lakh, the old regime likely saves you more tax. Below that threshold, the new regime is usually better.

The Right Reason to Buy Insurance in 2026

Here is what we tell every client at Sivaprakash Wealth: buy insurance for protection, not just for tax benefits.

A term plan giving ₹1 crore cover for your family costs around ₹800–₹1,200 per month. The peace of mind it provides cannot be measured in tax savings.
A health insurance plan covering your family against hospitalisation costs up to ₹10 lakh is indispensable — regardless of 80D.
An LIC endowment plan builds guaranteed savings over 20–25 years and the maturity proceeds remain tax-free.

The tax deduction was always a bonus. The core purpose — protecting your family's financial future — remains unchanged.

Choosing the Right Regime for Your Situation

This is where a personalised review matters. At Sivaprakash Wealth, we help you:

Calculate your exact tax liability under both regimes based on your income and current investments
Identify which deductions you are already utilising versus which ones you are paying for but not fully claiming
Advise whether to opt in or out of the new regime before the financial year deadline
Structure your insurance portfolio for protection — not just tax optics

Next Steps

If you are unsure which tax regime suits your income profile for FY 2025-26, reach out before you file your return. A 30-minute consultation can save you thousands — or ensure your insurance purchases are driven by the right reasons.

📞 Call or WhatsApp: +91 98841 10537
✉ Email: licsivaprakash.98@gmail.com
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Tax Savings Under the New Tax Regime 2025-26: What LIC & Insurance Can Still Do