LIC Policy Tax Benefits | Get Life Insurance Corporation of India Tax Benefits here

LIC Policy Tax Benefits

LIC Policy Tax Benefits are like an add-on given to the customers by Life Insurance Corporation of India. When the income of a customer rises up, then the tax bracket too gets widen. i.e., earning is directly proportional to the tax. In order to save money, LIC investment insurance policies serve in a better way. Moreover, there are different types of tax benefits over the Term Insurance Plans. Further, for most of the insurance schemes, LIC Policy Tax Benefits are applicable. These Tax Benefits are according to the existing Income Tax Laws.

Income Tax Rates for 2017-2018

Income Slabs

Tax Rates

Individual as well as HUF – Age < 60 Years

Individual – 80 < Age <=60 Years

Individual – Age >= 80 Years  
Income up to Rs.2,00,000 Income up to Rs.2,50,000 Income up to Rs. 5,00,000

NIL

Rs.2,00,001 to Rs.5,00,000 Rs.2,50,001 to Rs.5,00,000

10%

Rs.5,00,001  to  Rs.10,00,000 Rs.5,00,001  to  Rs.10,00,000 Rs.5,00,001  to  Rs.10,00,000

20%

Above Rs.10,00,001 Above Rs.10,00,000 Above Rs.10,00,000

30%

  • Surcharge: Consider the customers come under above category, also holding a total income of more than one crore rupees. Then, the income tax as calculated above be raised by a surcharge at the rate of 10% of such income tax.
  • Education Cess: It’s an additional surcharge levied at the rate of 2% on the Income Tax amount in all the cases shall be levied.
  • Secondary as well as Higher: It’s an additional surcharge on the Income Tax at the rate of 1% of Income Tax as well as Surcharge in all the cases shall be levied. (NOTE: without the inclusion of  “Education Cess on Income Tax”)

Significant LIC Policy Tax Benefits which are available under various LIC Plans

For different Life Insurance Corporation of India Policies, respective Tax Benefits are available, such as:

  1. Deduction allowable from the Income for Life Insurance Premium Payment under Section 80C
  2. New Jeevan Nidhi Policy as well as New Jeevan Suraksha – I Scheme under Section 80CCC
  3. Also, Deduction under Section 80D
  4. Jeevan Aadhar Policy under Section 80DD
  5. Exemption in commutation of pension under Jeevan Suraksha, besides Jeevan Nidhi Policies
  6. Income Tax exemption on Demise/Maturity Claims proceeds under the Section 10(10D).

Let’s look deep into the Tax Benefits.

1. Deduction allowable from the Income for Life Insurance Premium Payment under Section 80C

  • Consider the Premium Amounts paid to keep in force the Life Insurance on the assessee or spouse or child life, also in HUF case. Deduction will be as follows:
    • Policy Issue on or before 31st March 2012 – deduction to the extent of 20% of actual capital assured sum.
    • Policy Issue on or after 1st April 2012 – deduction to the extent of 10% of actual capital assured sum.
  • Contribution to the deferred annuity Plans to keep in force a contract on his own life or the life of his spouse or any child of such individual. Moreover, such contract does not contain a provision to exercise an option by the policyholder to receive a cash payment in lieu of the annuity payment is eligible for deduction.
  • Besides, Contribution to Annuity Plans – New Jeevan Dhara , New Jeevan Dhara – I, as well as, Jeevan Akshaya – VI.

2. New Jeevan Nidhi Policy as well as New Jeevan Suraksha – I Scheme under Section 80CCC

  • A deduction to an individual for any amount paid by him from his taxable income in the above annuity plans for receiving pension is allowable.

KEY NOTE: The aggregate amount of deduction under sections: 80C, 80CCC & 80CCD(1) shall not exceed 1,00,000 Rupees in any case. However, the limit of Rs.1,00,000/- can be dead by paying premium under any of the above sections.

3. Deduction under Section 80D

  • Consider if an amount is paid to keep in force the health insurance of policyholder or his family. Also, consider if any sort of contribution made to the Central Govt Health Scheme, else an account of Preventive Health Check-up (up of policyholder or his family). Moreover, for the above two cases, deduction is allowable up to Rs.15,000/-.
  • An amount is paid to effect the health insurance of parents. Also in the case of Preventive Health Check-up (up of policyholder’s parents). However, for the above two cases, an additional deduction of Rs.15,000 is allowable.
  • Also, consider the case of HUF. If an amount is paid to keep in force the health insurance of any HUF member, deduction is allowable up to Rs.15,000/-.
  • In above three cases, if the person is a senior citizen, then deduction of Rs.20,000 will be allowable.
  • Consider the first three cases. If they are on account of Preventive Health Check-up, then deduction will be allowable to the extent which doesn’t exceed Rs.5,000/- in aggregate.

4. Jeevan Aadhar Policy under Section 80DD

  • Deduction from the total income up to Rs.50,000/- will be allowable on amount deposited with LIC under Jeevan Aadhar Plan. Moreover it’s for the maintenance of an handicapped dependent (One Lakh Rupees where handicapped dependent is suffering from the severe disability).

5. Exemption in commutation of pension under Jeevan Suraksha, besides Jeevan Nidhi Policies

  • LIC Policy Tax Benefits u/s 10(10A) (iii) of the Income Tax Act. If any payment received by the way of commutations of pension out of Jeevan Suraksha as well as Jeevan Nidhi Annuity plans is exempt from the LIC Policy tax benefits.

6. Income Tax exemption on Demise/Maturity Claims proceeds under the Section 10(10D)

According to the Section 10 (10D) of the Income Tax Act, 1961, any sum received under an LIC Policy, including the sum allocated by the way of bonus on such policy is exempt from the LIC Policy Tax Benefits. Where the sum is received as the death benefit. However, to get exemption under the above section for sum received other than death benefit.

  • Policy shall not be issued under Section 80DD(3), or
  • LIC Policy shall not be issued as a Keyman Insurance Policy, or
  • Policy which has been issued on or after April 1, 2003 and if the premium paid in any of the years during the term of the policy shall not exceed 20% of the Actual Capital Sum Assured.
  • The Policy which has been issued on or after April 1, 2012 and if the premium paid in any of the years during the term of the policy shall not exceed 10% of the Actual Capital Sum Assured.

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