How Can Your LIC Premiums Help You Save Income Tax?

The Life Insurance Corporation is a leading insurance company in India. It offers a diverse range of insurance products tailored to meet the needs of different customers. As an individual's annual income rises, so does the amount of income tax they are liable to pay. If you're seeking to reduce your tax burden, there are several life insurance policies available that offer significant tax savings.

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How Can Your LIC Premiums Help You Save Income Tax?

The Life Insurance Corporation is a leading insurance company in India. It offers a diverse range of insurance products tailored to meet the needs of different customers. As an individual's annual income rises, so does the amount of income tax they are liable to pay. If you're seeking to reduce your tax burden, there are several life insurance policies available that offer significant tax savings.

Read more
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Tax Benefits on Various LIC Insurance Policies

Below are the tax benefits that come with your LIC insurance policy: 

  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 your spouse or child, then up to 20% of tax deduction can be availed on the premium paid towards the 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 the 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 the Income Tax Act. 

  2. Tax exemption offered under section 80CCC on life insurance policies from LIC:

    The tax advantage offered by Section 80CCC applies to individuals who allocate premiums from their taxable income towards an annuity plan, ensuring future pension payouts.

    • 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. 

    • Rs 50,000 is the limit for this deduction. If the handicapped person suffers severe disability, then the limit increases to Rs1,00,000.

    • The qualifying amount under section 80D is up to Rs. 15,000, and additional deduction up to Rs15,000 is applicable for the parents. If the parents are senior citizens, then up to Rs. 20,000 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. 

    • Hindu Undivided Families (HUFs) can claim a deduction of up to Rs. 25,000 for payments made towards obtaining health insurance for any member of the HUF.

  4. Tax deduction on LIC policies under section 10(10D): 

    Under section 10(10D) of the Income Tax Act, the death claim and maturity benefit received by the insured person are eligible for tax benefit. This section also 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 a 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 of an 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 exemption is Rs1,50,000.

    • This also includes all other tax deducted financial products, which fall under section 80C of the Income Tax Act.

    • Rs1,50,000 is the combined maximum limit of deduction under sections 80C, 80CCC and 80CCD of the Income Tax Act.

FAQ's

  • How LIC help in tax saving?

    LIC policies help in tax saving by allowing taxpayers to claim a deduction for the premium paid towards the policy under Section 80C. This deduction can help to reduce the taxpayer's overall taxable income and, thus, their tax liability.
  • Which LIC policy is best for tax benefit?

    There are a number of LIC policies that offer tax benefits. Some of the most popular policies include:
    • LIC Jeevan Umang

    • LIC Jeevan Labh

    • LIC New Jeevan Anand

    • LIC Jeevan Lakshya

    However, the best LIC policy for tax benefit will vary depending on the individual's specific needs and financial goals. Therefore, it is advisable to consult with a financial advisor to choose the right policy for your needs.

  • Is LIC premium eligible for 80C?

    Yes, LIC premium is eligible for a deduction under Section 80C of the Income Tax Act, 1961. The deduction is available for premiums paid towards LIC insurance policies issued in the name of the taxpayer, their spouse, and their children. The deduction is subject to an overall limit of INR 1.5 lakh.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
++Returns are 10 years returns of Nifty 100 Index benchmark

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