Let’s start with the harsh truth, “Everyone wants to earn more but no one wants to pay more taxes.” You might look for different options available for tax deductions. In the list of many, LIC is a prominently known and most credible source of providing you with large tax benefits on various life insurance policies. The policies provided work as the best investment, risk coverage, and security options and help you with tax benefits under section 80C of the Income Tax Act, of 1961.
LIC of India offers various types of life insurance policies that offer multiple benefits to policyholders. Customers can compare and buy a suitable life plan from LIC endowment plan, LIC term plan, LIC whole life plan, LIC pension plan, LIC ULIP plan, LIC micro insurance plan, and LIC health plan. The policies also offer attractive tax benefits that you might not be aware of.
Reading this article will help you start with tax planning, and investment to save your earnings from tax deductions. Be ready to avail yourself of the tax benefits and enjoy other advantages of LIC insurance plans.
Here’s the pick:
As per the Budget 2023 proposes, any income received from insurance policies issued on or after 1st April 2023 (except for ULIP) having an aggregate annual premium exceeding Rs. 5,00,000 in a year, will be taxable.
The policyholders can avail of tax deductions for the premiums paid and benefits received under an LIC policy. When you pay an amount in the name of the premium, the tax deductions are available upto an extent. For the benefit received, whether the death or maturity benefits from an LIC policy, some tax exemptions are applicable. After comparing different life insurance policies as per your needs, you can select the most suitable one to gain the tax benefits of LIC policies. Let’s learn about the LIC tax deductions and exemptions in detail:
If you buy any policy and pay a premium, that paid premium will be allowed as a deduction from your taxable income. The highlights include-
If you select to pay a premium towards a life insurance policy issued on or before 31st March 2012 in the name of self or spouse or child or HUF (Hindu Undivided Family), then a tax deduction of up to 20% shall be eligible for the actual capital sum assured or actual premium paid (whichever is less).
In case, you select to pay a premium towards a life insurance policy issued after 1st April 2012 in the name of self or spouse or child or HUF), then tax deduction of up to 10% shall be eligible for the actual capital sum assured or actual premium paid (whichever is less).
In case, you select to pay a premium towards a life insurance policy issued on or after 1st April 2013 in the name of any person with a disability/ severe disability under the section 80U or suffering from a disease specified under the section 80DDB, then tax deduction of up to 15% shall be eligible for the actual capital sum assured or actual premium paid (whichever is less).
Any contribution made towards a deferred annuity plan to keep a deferred annuity in the name of self or spouse or child is eligible for deduction but only if the provision does not offer a cash payment to the customer or else the annuity is eligible for tax deductions.
A tax deduction is provided to the individual who pays the insurance premium from their taxable income in the above annuity plans highlighted under section 80C promises them the payment of pension in the later year.
Tax benefits on LIC premiums paid under 80 C or 80CCC can be availed by self or HUF.
The total amount of deduction under 80C or 80CCC can be claimed on an amount up to one lakh fifty thousand rupees.
Tax deduction on LIC insurance policy under section 80D covers the health plans. Any premium paid towards LIC’s Jeevan Arogya or LIC’s Cancer Cover Plan would be eligible for tax deduction.
Upto Rs. 25,000 is allowed as a deduction if you paid a policy for self or spouse or child. If you are above 60 years, then the amount increases by Rs. 5000, and a deduction of up to Rs. 50,000 is available.
The tax benefits on LIC insurance premium paid under section 80DD is allowed when a person deposits a certain amount for the maintenance of a handicapped person. The deduction from total income up to Rs. 75,000 is allowed. In case the disability is severe then the limit is increased up to Rs. 1,00,000.
Any death claim or maturity benefit received by a policyholder is eligible for tax exemption under section 10 (10 D) of the Income Tax Act. The tax exemptions highlighted under this section are-
The tax benefits are only applied if the main insurance policy is not issued under section 80 DD or as a keyman insurance policy.
Any sum received under an insurance policy issued on or after 1st April 2003, is eligible for tax exception up to 20% of the actual sum assured.
Any sum received under an insurance policy issued on or after 1st April 2012, is eligible for tax exception up to 10% of the actual sum assured.
Any sum received under an insurance policy issued on or after 1st April 2013, is eligible for tax exception up to 15% of the actual sum assured, only if the disability is listed under section 80U or 80DDB.
In order to claim maximum benefits, you need to consider a few key points-
The maximum deduction allowed as the exemption is Rs. 1,50,000.
Rs. 1,50,000 is the combined maximum limit of deduction under sections 80C, 80CCC, and 80CCD of the Income Tax Act, 1961.
Any money received from a matured life insurance policy, where the premium paid is more than 10% or 20% of the sum assured, is fully taxable and does not allow any exemption in tax benefits.
If you receive an amount of more than Rs. 1,00,000 that is not covered under Section 10 (10D) of the Income Tax Act, 1961, then a TDS @1% will be deducted by the policy payer. If you receive an amount less than Rs. 1,00,000, no TDS shall be deducted but the full amount will be taxable. You can also file a claim on the TDS deducted from your ITR.
LIC provides different policies for tax benefits as per the demand of the customers. You might get puzzled to understand the tax benefits you can avail yourself from different LIC policies. Here are the best LIC plans list to seek tax benefits-
LIC Jeevan Umang policy available under section 80C of the Income Tax Act, 1961, offers dual benefits including earnings as well as savings for the secured future of your family. This is a non-linked and with profit life insurance plan with 100 years of coverage. You can get the tax benefits as death amount, maturity amount, as well as survival benefit amount.
LIC Jeevan Labh policy is available under sections 80C and 10 (10 D) of the Income Tax Act, 1961, which offers with profit, non-linked, and participating endowment plan. Here you need to pay a premium for a certain period of time. You can expect tax benefits, loan benefits, death benefits, and maturity benefits to meet the needs of the policy payer.
Being the highest-selling policy of all time, LIC Jeevan Anand Plan stands as the best policy option for middle-class families. Listed under section 80C of the Income Tax Act, of 1961, this policy provides tax benefits on premiums paid, risk coverage, saving facilities, double death benefits, and a lump-sum amount on maturity.
This is non-linked and pure protection “Online Term Assurance Policy” that provides financial benefits to the family in case of the unfortunate demise of the policy payer. You can opt for LIC Jeevan Tech Term plan for up to 40 years and from an online mode. This plan doesn’t include any maturity benefits and coverage is only provided on risk.
This is a pure-term plan launched by LIC in 2019. LIC Jeevan Amar doesn’t offer any type of returns but provides financial assistance to the family in case of the unfortunate demise of the insurer. This is a non-linked and non-participating plan that provides financial security and stability to the family.
LIC is one of the most trusted life insurance companies in India, having the strongest customer base. It is not a metaphor to say that you can save a big amount with LIC to gain tax benefits. Not only, do they help you to save your hard-earned money but also provide you and your family with financial security. You can choose from the various plans and select the one that fits best for your saving and investment plans.
Once you purchase a suitable LIC life plan, you can go to the LIC customer portal login and manage your policy online, like LIC premium payment, LIC policy status check, and track LIC claim status. In case any assistance is needed at any stage, you can directly connect with the LIC customer support team.
If you want assistance while buying a LIC life insurance policy, connect with the nearest LIC agent or search for a life insurance agent nearby using RenewBuy Advisor Connect.