Tax exemptions have been one of the driving forces for potential buyers to invest in life insurance. One can save a significant amount of their annual income through tax deductions as per the Income Tax Act, 1961. Likewise, you can now save and be insured at the same time with LIC’s Bima Bachat policy. Let’s take a quick look at the plan before understanding its tax benefits.Read more
LIC Bima Bachat was introduced as a single premium paying, money-back policy. Its primary goal is to offer survival benefits at specific durations within the policy tenure. In addition, the policy pays back the single premium amount to the policyholders on the maturity of the policy.
The policy offers a sum assured on death along with loyalty additions.
Survival benefits are offered in the 3rd, 6th, 9th, and 12th policy years, depending on the policy tenure chosen by the policyholder.
The single premium amount is returned to the policyholder as maturity benefit if (s)he survives the policy term.
The policy is participating in nature and therefore, offers loyalty additions on the benefit amount.
The policyholder has the flexibility to choose from a policy term of 9, 12, and 15 years.
There is no limit to the maximum sum that one can assure.
Policyholders can avail of extra protection with LIC’s Accidental Death and Disability Benefit Rider and LIC’s New Term Assurance Rider.
One can also choose to receive the death and the maturity benefit in installments throughout 5, 10, or 15 years.
One can also enjoy rebates if he/she opts for a higher sum assured.
Yes, LIC Bima Bachat is taxable. It is a popular choice among the masses given its tax implications. The following sections detail the tax benefits associated with LIC's Bima Bachat insurance policy.
Tax benefits with LIC Bima Bachat policy are three-fold.
Tax Benefit with Premium Payments - The premiums paid towards the life cover in LIC Bima Bachat is qualified for tax exemptions U/S 80C of the IT Act, 1961. One can claim a deduction of maximum of Rs.1.5 lakhs.
Tax Savings with Survival / Maturity Benefits - Further, under Section 10(10 D) of the Income Tax Act, 1961, the survival and maturity benefits of the policy are tax-free.
Taxable Death Benefit Payout – The claim amount that the assigned nominees receive on the death of the life assured is also exempt from taxes.
Given the above-mentioned tax benefits associated with LIC Bima Bachat, a lot of the insurance buyers choose this money-back policy.
Please note that tax benefit under Section 80C of the Income Tax Act is only applicable to the extent of 10% of the sum assured or the absolute premium amount paid by the life assured.
However, there is no limit to tax deductions in case of the death benefit proceeds.
You must clarify the taxable amount in LIC's Bima Bachat with your insurance provider to gain a correct estimate of the deductions mentioned above.
Taxable benefits are applicable only up to a certain percentage of the sum assured. Get in touch with the insurer to understand the terms and conditions applicable to your life cover.
While tax benefits are something to look forward to when buying insurance, they shouldn't be the sole reason behind your purchase. Insurance is a critical investment and should only be bought after careful consideration of your current and future needs above all. We would strongly advise you to go through the terms under your LIC Bima Bachat life cover and the associated taxable income.