Life Insurance Corporation is the topmost insurance provider in India. Life insurance is essential for ensuring a financially balanced and comfortable life for your loved ones. It gives financial support to your family that no one can. Taking life insurance is, therefore, most needed in your part of life.
Amid its benefits after you, it may also help you at present. Life insurance has numerous tax benefits. Having insurance thus saves your hard-earned money from tax. Be aware of life insurance tax benefits for your better investment.
Under Sections 80C and 10D, you can claim life insurance tax benefits. Let us dive into detail about LIC deduction in income tax
LIC deduction under Section 80C
The insurance policies you took are eligible for deduction under section 80C of the Income Tax Act. Your premium amount to these policies is tax-free.
The rules for 80C exemption are:
1. If you took the policy on or before 31st March 2012 in your name or of family members, avail 20% tax deduction on the premium.
2. If you took the policy after 1st April 2012, avail 10% tax deduction on the premium.
3. The premium towards deferred annuity is eligible for tax deduction under section 80C of the Income Tax Act.
LIC deduction under Section 10D
If you receive the death claim and maturity benefit, you are eligible for tax benefit for the claim amount under section 10(10D).
However, this section includes:
1. This tax benefit is applicable only if you did not receive an insurance policy under section 80DD.
2. If you receive any benefits under the policy, that amount is not eligible for the tax deduction.
3. Up to 20% of the actual sum assured is tax deductible for policies issued on or after 1st April 2013.
4. Up to 10% of the actual sum assured is tax deductible for policies issued on or after 1st April 2012.
However, while availing of life insurance tax benefits, be aware of the following things.
1. The maximum deduction allowed for the tax exemption is Rs1,50,000.
2. This deduction includes all other tax-deducted financial products under section 80C of the Income Tax Act.
3. Rs1,50,000 is the combined maximum limit of deduction under sections 80C, 80CCC, and 80CCD of the Income Tax Act.
What are the benefits of taking a LIC policy?
LIC policy has numerous benefits for you and your family. Let us detail some below,
1. LIC policy provides you with a high-life-risk cover that protects you and your family in case of an unfortunate event.
2. It has benefits in case of an untoward happening to you, your family receives the entire sum with the bonus and benefits of the policy. It gives them financial stability.
3. There are also policies for accidents, retired people, aged people with diminishing income and so on. Choose as per your requirement to enjoy the full benefit of it.
4. LIC policy has a high return on investment compared to other financial instruments. The money you invest will come back with a bonus no matter what the case is.
5. Section 80C of the Income Tax Act covers tax exemption for the premium of your LIC policy. Thus your premium amount is tax-free.
6. You can also avail loan from your policy in case of desperate need of money.
7. LIC policy also helps to achieve your long-term goals with proper investment. It may be your Children’s future, your dream home, etc.
These are the ample benefits of taking a LIC Policy.
How much LIC premium is tax deductible?
The premium you pay for your life insurance is tax deductible under Section 80C of the Income Tax Act.
To claim deduction under section 80C, the premium you pay should not exceed 10% of the sum assured where you took the policy after 1st April 2012.
To claim deduction under section 80C, the premium you pay should not exceed 20% of the sum assured where you took the policy before 1st April 2012.
Who can claim LIC deduction?
You are eligible for tax exemption for the premium you pay for the Insurance policy you hold. This exemption comes under Section 80C and Section 10D.
If you took a policy in your name, you claim a Life insurance deduction. If the policy is in your spouse’s name or your children’s name, you are still eligible to claim a deduction.
If you have the policy in the name of members of the HUF, you can claim a deduction under HUF.
If the policy is in the name of another person, you cannot claim the deduction.
FAQ: LIC deduction in income tax
1. Is LIC income exempt?
Suppose you bought life insurance for a sum assured of Rs.10 lakhs for a policy term of 10 years. At the end of 10 years, LIC of India is liable to pay this amount to you if you survive the whole period. It is called the maturity benefit.
The LIC maturity amount is fully tax-exempt under Section 10(10D) unless the premium exceeds 10% (20% in case of policies issued before April 1, 2012) of the sum assured.
It includes the total bonus amount as well.
So, you need not pay taxes for the LIC income. It is wholly a benefit for you.
2. Which LIC policy is best for tax exemption?
LIC has different policies that are suitable for various people. Find a policy that suits your requirement well and take that policy. Every insurance policy has tax benefits under Section 80C.
Every Policy like Jeevan Anand, Jeevan Umang, and children’s policies like Jeevan Tarun, New Children’s Money Back, Child Career, Jeevan Lakshya, or any other Child Plan, has the best life insurance tax benefits.
3. How much is the insurance premium tax-free?
You can claim a deduction for the premium you pay for your insurance policy while filing ITR.
This deduction comes under Section 80C of the Income Tax Act. You can claim up to Rs.1.5Lakhs for the premium you pay for the policy.
However, you should have the policy in your name or the name of your spouse or children to avail of this benefit.
4. Can I claim my parent’s LIC for tax exemption?
If you took health insurance for your parents, you can claim a deduction for the premium of that health insurance policy. If you took health insurance for yourself, your spouse, children, and parents, you are eligible for tax exemption for the premium you pay towards that insurance policy.
You can also claim benefits for preventive health checkups under that policy. You can claim these benefits under Section 80D of the Income-tax Act.
5. Can we claim LIC after maturity?
Yes, you can claim the benefits of your policy after maturity. If the insured outlives the term of the policy, he can claim the benefits on maturity.
However, you can claim the maturity benefits only when the policy is active.
LIC will verify all your documents and you will receive the maturity benefit in your bank account.
6. Is LIC a mediclaim?
Mediclaim comes under the Health Insurance policy that is different from Life Insurance.
The difference between health insurance and Life insurance is,
Health insurance manages your medical expenses while you are still alive, while life insurance helps your family financially in case of your untimely demise.
However, LIC has several health insurance policies as well like
Jeevan Arogya Plan etc. These policies help you as well.
7. Does LIC cover accidents?
You can purchase accidental insurance as a supplement to a life insurance policy. Some life insurance policies provide an accidental death benefit rider that adds to the base plan for an additional cost.
You can customize the life insurance policy as per your requirements.
Bottom line
Life insurance gives financial support to your family that no one can. Taking life insurance is, therefore, most needed in your part of life. It has tax benefits that reduce your taxable income. This exemption comes under sections 80C and 10D. So, you have no option other than getting a life insurance policy.
In conclusion, LIC deduction in income tax provides taxpayers with a valuable opportunity to reduce their taxable income and potentially lower their tax liability. By taking advantage of this deduction, taxpayers can not only save money on their taxes but also secure their financial future through life insurance.