As one of the top insurance providers in India, Life Insurance Corporation offers a wide range of insurance products that suit the various demands of the insurance seekers. With the annual increase in the salary of an individual, the amount of income tax he/she has to pay also increases. Tax planning plays a significant role in order to save your hard-earned money.
If you want to save on taxes, then there are numerous life insurance policies that provide an opportunity to save bundles on taxes. Moreover, it also enables you to save and invest your hard earned money in order to reap the maximum benefits.
Tax benefits on various LIC insurance policies
According to the needs and suitability of the customers, LIC offers an array of different insurance policies. For the knowledge of our customers, here we have provided a list of all applicable tax benefit that people can avail if they own LIC policies
The tax benefits provided on the payment of LIC premium comes under section 80C of Income Tax Act, 1961.
1. Tax exemption offered under section 80C on life insurance policies from LIC:
- If you have purchased a life insurance policy on or before 31st March 2012 in your own name or in the name of spouse or child, then up to 20% of tax deduction can be availed on the premium paid towards life insurance policy.
- In case, the life insurance policy is purchased after 1st April 2012 in the name of self/child/spouse, then the premium paid towards life insurance policy is eligible for the tax benefit of up to 10% of the sum assured.
- The premiums paid towards deferred annuity are eligible for tax deduction under section 80C of Income Tax Act.
2. Tax exemption offered under section 80CCC on life insurance policies from LIC:
Tax benefit under Section 80CCC is provided to the policyholders who pay the premium towards any annuity plan that guarantees pension payment in the later year, from their taxable income.
- Tax benefit under section 80C and 80CCC can be availed by the individual assessee and HUF assessee.
- If the premium paid in a financial year exceeds 20% of the actual capital sum assured, then tax benefit will be applicable only for the premium up to 20% of the sum assured.
- Under section 80CCC, the maximum amount of deduction that can be claimed is limited to Rs 1,50,000/-.
3. Tax exemptions on LIC policies under section 80D:
- Under section 80D tax exemption is allowed for people who deposit a certain amount of money with the LIC for the support of a handicapped person. Generally, Rs50,000 is the limit for this deduction. If the handicapped person suffers severe disability then the limit increases to Rs1,00,000.
- Tax benefit under section 80D can be availed by individual assessee and Hindu Undivided Family (HUF).
- The qualifying amount under section 80D is up to Rs15,000 and additional deduction up to Rs15,000 is applicable for the parents. If the parents are senior citizens, then up to Rs20,000 is permitted for the tax deduction. Within the tenure of the policy, the policyholder is allowed to make any payment of up to Rs.5,000 on account of preventive health checkups.
4. Tax deduction on LIC policies under section 10(10D):
Under section 10(10D) of income tax act, the death claim and maturity benefit received by the insured person are eligible for tax benefit. However, this section includes some possibilities like-
- Primarily, this tax benefit is applicable only if the main insurance policy is not issued under section 80DD or as a key man policy.
- Any benefit as sum assured received under a life insurance policy including the bonus amount is exempted from the tax deduction.
- Up to 20% of the actual sum assured is tax deductible for policies issued on or after 1st April 2013.
- Up to 10% of the actual sum assured is tax deductible for policies issued on or after 1st April 2012.
What we have discussed above are the lists of various tax benefits that are applicable to the life insurance policies offered by LIC. However, while availing insurance policy and exercising your tax benefits, in order to reap maximum benefit, there are very important aspects that should be kept in mind.
- Maximum deduction allowed as tax exception is Rs1,50,000.
- This also includes all other tax deducted financial products, which fall under section 80C of Income Tax Act.
- Rs1,50,000 is the combined maximum limit of deduction under section 80C, 80CCC and 80CCD of Income Tax Act.