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 insurance policies. The policies provided work as the best investment, risk coverage, and security plans and help you with tax benefits under section 80C of the Income Tax Act, of 1961.
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.
Tax Benefits Offered by LIC Plans:
The tax benefits of LIC plans can be identified as deductions and exemptions. When you pay any premium for a LIC policy, deductions are available and when you get any benefit from a LIC policy, you get exemptions. After comparing different 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 tax deductions and exemptions in detail:
Tax Deduction Offered On LIC Insurance Policies Under Section 80C:
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-
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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).
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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).
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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).
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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.
Tax Deduction Offered On LIC Insurance Policies Under Section 80CCC:
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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.
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Tax benefits on LIC premiums paid under 80 C or 80CCC can be availed by self or HUF.
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The total amount of deduction under 80C or 80CCC can be claimed on an amount up to one lakh fifty thousand rupees.
Tax Deduction Offered On LIC Insurance Policies Under Section 80D:
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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.
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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.
Tax Deduction Offered On LIC Insurance Policies Under Section 80DD:
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.
Tax Exemption Offered On LIC Insurance Policies Under Section 10 (10 D):
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-
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The tax benefits are only applied if the main insurance policy is not issued under section 80 DD or as a keyman insurance policy.
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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.
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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.
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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-
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The maximum deduction allowed as the exemption is Rs. 1,50,000.
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Rs. 1,50,000 is the combined maximum limit of deduction under sections 80C, 80CCC, and 80CCD of the Income Tax Act, 1961.
What Are The Chances Of No Exemption Of Tax Benefits?
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.
How Much TDS Benefit Do You Get On LIC Policy?
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.
Best 5 LIC Policies For Tax Benefits:
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:
This 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:
This 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.
LIC New Jeevan Anand Plan:
Being the highest-selling policy of all time, this 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.
LIC Jeevan Tech-Term Plan:
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 the policy 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.
LIC Jeevan Amar:
This is a pure-term plan launched by LIC in 2019. It 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.
Final Words:
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.