LIC Bima Bachat Tax Benefit

To save tax, a wide variety of exemptions and deductions are available under the various sections of the ITA. LIC Bima Bachat Policy is a tax saving and planning instrument. By investing in this plan, you are allowed to claim deductions from your taxable earning as per the ITA provisions. This simply means that the premium you pay helps reduce your tax liabilities.

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Let’s discuss LIC Bima Bachat Tax Benefits in detail for your easy understanding: 

LIC New Bima Bachat 

LIC Bima Bachat is a non-linked, non-participating, life assurance protection cum savings policy, where the premium amount is paid in a lump sum payment at the commencement of the policy. It is a money-back scheme that provides financial assistance and protection against demise during the policy tenure. 

Apart from all these benefits, LIC Bima Bachat offers tax benefits on premiums paid and claims received as per section 80C of the Income Tax Act. 

Tax Benefits Associated with LIC Bima Bachat Plan 

  • Section 80C – Tax deductions u/s 80C of the ITA, 1961 on a life insurance policy can be claimed for the premiums paid to insure self, partner, children, and any other member of HUF. Also, if the plan is issued on or before 31st March 2012, a yearly premium up to a maximum of 20 percent of the SA becomes tax-deductible. For the policies which are issued on or after 1st April 2012, a yearly premium up to a maximum of 10 percent of the SA is tax-deductible. 

  • Section 10(10D)- This section exempts the policyholder from paying taxes on the money he/she gets from the insurer. In this section, the sum assured and bonus received at the time of maturity or policy surrendering or on policyholder’s death are free of tax, subject to certain T&Cs. 

Tax Benefits on LIC Bima Bachat Plan Benefits 

To increase the demand for a life insurance policy, the government of India has permitted deductions on tax that is to be claimed on the benefits that you get from these policies. LIC Bima Bachat policy is a smart option for anyone who is looking out for a double benefit of protection and savings. Here is a quick laydown of the benefits that are offered by the LIC Bima Bachat plan and that offer tax benefits: 

  1. Death Benefits

    Death benefits are paid in case of policyholder’s demise during the policy tenure as per the following conditions: 

    • Upon the death during the 1st 5 years of policy: Sum assured on death 

    • Upon the death after the completion of 5 years of policy: Sum assured on death is payable along with the loyalty additions (if any). 

    In this, the nominee receives the sum assured on death as the highest of: 

    • 1.25X of the single premium 

    • Basic SA 

    Single premiums above-discussed shall not involve an additional premium, rider premium, and taxes. The claim amount that is paid on the policyholder’s death is also free of tax. 

  2. Survival Benefits

    If the life assured survives at the end of a specific duration during the policy time, a fixed % of basic SA is payable. The static % for various terms of the policy are: 

    • For 9 years of policy term: 15 percent of the basic SA after the 3rd and 6th plan year. 

    • For 12 years of policy term: 15 percent of the basic SA after the 3rd, 6th, and 9th year of the policy. 

    • For 15 years of policy term: 15 percent of the basic SA after the 3rd, 6th, 9th, and 12th year of the policy. 

    The pay-outs which are received are also free of tax u/s 10(10D) of the ITA, 1961. 

  3. Maturity Benefits

    On the policyholder surviving to the last of the policy tenure, the sum assured amount on maturity along with the loyalty additions shall be paid. In this, the sum assured on maturity is equivalent to a simple premium payable exclusive of all rider premium, additional premium, and taxes. 

    The pay-outs which are received are also free of tax u/s 10(10D) of the ITA, 1961. 

  4. Statutory Taxes

    The statutory taxes are imposed on these schemes by the Indian Government or any other tax authorities of India shall be according to the tax laws and the tax rate as applicable from time to time. The applicable taxes amount as per the prevailing rates shall be payable by the life assured on the single premium (that includes rider premium and extra premium), which then be collected individually in addition to the premium paid by the life assured. The amount of tax paid is not considered for the computation of benefits payable under the scheme. 

In Closing!

When you are purchasing LIC Bima Bachat - A single premium life insurance plan, make sure to keep the right life cover amount mainly if you want to opt for tax benefits. This plan not only helps you to avail tax benefits but also provides protection and saving for your long-term objectives. Above, we have discussed the LIC Bima Bachat Tax benefits in detail for your smooth understanding.

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