LIC or Life Insurance Corporation of India is a public sector company that deals with a number of insurance products to meet the insurance demands of different types of customers.
As the income of an individual increases every year, the required amount to be paid as tax also increases alongside. Hence, tax planning plays a tremendously important role to help in saving this well-deserved income to the furthest possible extent.
In the following section, you will get to know more about the various tax benefits applicable to the policies availed from LIC.
Tax Benefits under Section 80C
- Get a deduction of up to 20% of the assured capital amount on paying premium upon the policies availed from LIC on or before 31.03.2012 .
- Get a deduction of up to 10% of the assured capital amount on paying premium for the policies availed form LIC after 01.04.2012.
- Payment generated towards a deferred annuity plan initiated for either self, spouse, or child is liable to receive tax deduction but only if the policy does not offer cash to its customers against the annuity plan.
Tax Benefits under Section 80CCC
- Section 80CCC provides exemption on tax to clients paying their premium from their taxable income aimed at any annuity plan that is likely to pay pension later on.
- The pension should be generated by the policy from the collected funds and this is true as per the terms of section 10 (23AAB).
- In case a policy holder receives interests or bonuses accrued from the policy, the amount would not be eligible for receiving any tax exemptions.
- In a fiscal year, the maximum limit allowed for tax deduction on LIC policy premiums is Rs. 1.5 lakh.
- The accrued bonuses and interests from any policy are liable to be taxed as they will be considered as income generated during the previous year.
- In case of any surrendered amount of the annuity plan, either partly or wholly, the same will be considered as income and accordingly taxed under section 80CCC
- Tax deductions are not applicable on the money that is deposited before 01.04.2006 under section 80C
Tax Benefits under Section 80D and 80DD
Almost all tax benefits related to health insurance fall under the purview of Section 80D of the Income Tax Act. The Section 80DD comes under the roof of section 80D and looks after the tax exemptions of any person who has generated the policy for maintaining a handicapped individual. The deduction limit is set at Rs. 50000 and in case of severe disability of the handicapped individual; the limit is enhanced up to Rs. 100000. An example of this type of insurance policy is the Jeevan Aadhar plan.
Tax Benefits under Section 10 (10D)
- In case a policyholder receives any death claim or maturity benefits, the holder becomes eligible for receiving tax exemption under section 10 (10D) of the Income Tax Act.
- Tax exemption of up to 20% of the assured sum is applicable for policies generated on or after 01.04.2013.
- Tax exemption of up to 10% of the assured sum is applicable for policies generated on or after 01.04.2012.
- The policies should be issued for protecting a person who is suffering from extreme disability as referred under section 80U, or is suffering from an ailment under section 80DDB
One essential point to be kept in mind is that the maximum amount allowed for tax deduction is Rs. 150000 and this is applicable for all the financial products exempted from tax; especially those that are counted under section 80C as well.
In a nutshell, it is very important to plan out the tax component of LIC policies; make sure you do so at the earliest.