Tax Advantages of Life and Personal Accident Insurance

Tax Advantage on the Personal Insurance Premiums Paid:

Total amount of the premiums to be deducted from the tax base of the salary may not exceed 15% of the salary received in the month of payment of the premium and the annual amount of the monthly minimum wage

1. Personal Insurance Premiums Paid by the Participant

  • 50% of the premiums paid by the employees for the life insurance policies under which the saving premium belonging to the employee, their spouse and children under 18 years old and
  • the premiums paid by the employees for any personal insurance, such as death, accident, health, illness, disability, unemployment, motherhood, childbirth and education insurance, can be deducted from the income tax base of the salary up to 15% of the salary received by the employee.

Total sum of the premiums to be deducted from the tax base may not exceed 15% of the salary received in the month when the premium was paid and the annual amount of the monthly minimum wage.

Any change to the minimum wage during the year is taken into account in the assessment of the amount to be deducted from the tax base.

Sample Application:


Monthly gross salary TRY 2,000
Maximum amount of premium to be deducted from the tax base (gross salary x 15%) TRY 300
Annual Limit Annual Gross Minimum Wage
Annual Income Tax Base TRY 2,000 - 300 = 1,700*
Income tax payable if the tax rate is within the %20 bracket TRY 1,700 x 20% = TRY 340
Income tax  payable if no premuim was paid TRY 2,000  x 20% = TRY 400
Tax advantage of the customer TRY 400 - 340 = 60
2. Since the income tax base will decrease with the deduction of the Personal Insurance Premiums paid by the employers, the income tax payable by you will decrease as well.

​​ Since the personal insurance premiums paid by the employers are considered as a remuneration paid for the purpose of earning of a commercial profit and maintenance of a business, they can be deducted from the tax base as overheads without any amount and rate limit pursuant to the Income Tax Law.

If both contribution is paid by an employer to the Private Pension System on the name and account of an employee and premium is paid by the same employee for a personal insurance and if the total sum of the contribution and the premium exceeds the limit specified above, the matter of whether the deduction will be made from the income tax base of the employee or from the income tax base of the employer can be freely agreed between the employee and the employer, provided that duplicate deduction is not made.

The total sum of the contribution paid by an employer to the Private Pension System on the name and account of an employee and the premium paid for a personal insurance policy which can be deducted from the tax base pursuant to sub-paragraph (3) of first paragraph of article 63 of the Income Tax Law may not exceed 15% of the salary received in the month when the payment was made and the annual amount of the monthly minimum wage.

Sample Application:

Employee’s tax bracket

%27

%27

Tax deduction allowed to the employer on account of the Social Security Premium paid on the name and account of the employee

%0

%15

Annual gross income of the employee

25,000

25,000

Annual contribution paid by the employer on the name and account of the employee

-

3,750

Income tax base of the employee

25,000

21,250

Amount of tax paid by the employer for the employee

6,750

5,738

Tax advantage gained by the employer

-

1,013

Annual net contributions paid

-

2,738

3. Deduction of any Personal Insurance Premiums Paid from the Incomes Declared by Annual Tax Return,

Pursuant to an amendment made by article 8 of the Law No. 6327 to sub-paragraph (1) of first paragraph of article 89 of the Income Tax Law, any premiums paid for any personal insurance other than private pension can be deducted from the income declared by the annual tax return in the assessment of the tax base up to an amount which is equal to 15% of the declared income. The declared income is the one before the deduction of any reductions contained in the annual tax return and of any losses in previous years. In no case a reduction may be made in respect of any contributions paid to the Private Pension System.

The insurance premiums to be considered in the assessment of the tax base on the annual tax return consist of:

  • 50% of the premiums paid for a life insurance under which the saving premiums of the tax payer himself/herself and his/her spouse and children under 18 years old are received and
  • the premiums of personal insurances such as death, accident, illness, health, disability, motherhood, childbirth and education.

Total sum of the deductible premiums may not exceed 15% of the declared income and the annual amount of the minimum wage.

In the assessment of these limitations;

  • the contributions paid by the employers on the name and account of the employees to the Private Pension System and
  • the total sum of the paid premiums that can be deducted from the tax base in accordance with sub-paragraph (3) of first paragraph of article 63 and sub-paragraph (1) of first paragraph of article 89 of the Income Tax Law are considered together.

In order that any personal insurance premiums can be deducted in the assessment of the tax base, it is required that the insured has purchased the pension plan or the insurance from a pension company or an insurance company based in Turkey and that the premiums were paid within the year when the income was earned.

In order that the premiums paid by a tax payer can be deducted from the income declared with the annual tax return, it is required that these premiums have not already been deducted in the assessment of the net amount of the salary.

In the case that the spouse and the children of a tax payer files a separate tax return, the premiums and contributions paid on the name and account of the spouse and the children are required to be deducted from their own incomes in the first instance.

Sample Application:

Annual income declared TRY 20,000
Maximum amount of premium to be deducted from the tax base (gross salary x 15%) TRY 3,000
Annual Limit Annual Gross Minimum Wage
Annual Income Tax Base TRY 20,000 - 3,000 = 17,000*
Income tax payable if the rate is within the %20 bracket TRY 17,000 x 27% = 4,590
Income tax  payable if no premuim was paid TRY 20,000  x 27% = 5,400
Tax advantage of the customer TRY 5,400 - 4,590 = 810

Since the income tax base will reduce, the income tax payable will reduce as well.

Pursuant to the provision of sub sub-paragraph (a) of sub-paragraph (1) of first paragraph of article 86 of the Income Tax Law amended by the Law No. 6327, the amount of incomes earned from the Private Pension System and any personal insurance and being subject to withholding tax may in no case be declared with the annual tax return.