Personal Finance Common misconceptions about life insurance tax benefits Updated : July 12, 2019 11:32 AM IST The tax benefit is capped at Rs 1.5 lakh under Section 80C. So, even if you pay Rs 4 lakh annually, the tax benefit is capped at Rs 1.5 lakh per annum. And that’s for the entire Section 80C basket. Additionally, the entire life insurance premium paid may not be eligible for tax deduction. The quantum of insurance premium eligible for tax deduction is restricted in relation to the Sum Assured (Minimum Death Benefit).