What are Lic Policy Tax Benefits

Lic Policy Tax Benefits

Lic Policy Tax Benefits are available for most of the Lic Insurance Plans. Many of the Life Insurance Plans gives you an additional advantage of Lic Policy Tax Benefits. Income tax rates increases along with the increase in your Income. You can save your hard earned money by investing it in the Lic Insurance Plans. There are many plans with Lic policy Tax Benefits. From those find the best Lic Policy for Tax Benefit.

In most of the Lic Insurance Plans, Lic Policy Tax Benefits are available for the premiums you paid. Contribution towards lic policy is allowed as deduction in income under Existing Income Tax Laws. That is you not only provide financial security to your family in the unfortunate event, but also reap the Lic Policy Tax benefits from Lic tax saving plans through premium contribution in ULIPs.

Income Slabs			Tax Rates
Individual & HUF below age of 60 years	Individual 60 years of age and more but less than 80 years	Individual 80 years of age and more
Income upto Rs.2,00,000	Income upto Rs.2,50,000	Income up to Rs. 5,00,000	NIL
Rs.2,00,001 to Rs.5,00,000	Rs.2,50,001 to Rs.5,00,000	—	10%
Rs.5,00,001  to  Rs.10,00,000	Rs.5,00,001  to  Rs.10,00,000	Rs.5,00,001  to  Rs.10,00,000	20%
Above Rs.10,00,001	Above Rs.10,00,001	Above Rs.10,00,001	30%

Surcharge Cess: In case the persons covered under above categories having an income of 1 crore rupees, the tax as calculated above will be increased by a surcharge at the rate of 10% of such income- tax.

Education Cess: Education Cess is an additional surcharge levied at the rate of two per cent on the amount of Income tax in all cases shall be levied.

Secondary and Higher Education Cess: Secondary and Higher Education Cess is also an additional surcharge on income tax at the rate of 1% of income-tax and surcharge (where “Education Cess  on Income – tax” is not included) in all cases shall be levied.

Lic Policy Tax Benefits available under various plans of Life Insurance are highlighted below:

1)  Lic Policy Tax Benefits : Deduction allowable from Income for payment of Life Insurance Premium (Sec. 80C).

Lic Policy Tax benefits under Section 80C are,

(a) Premium paid in order to keep in force an insurance on the life of the assessee / Spouse / any child and in the case of HUF, under an insurance policy, (other than a contract for a deferred annuity) issued on or before 31^st  March 2012 shall be eligible for deduction to the extent of 20% of the actual capital SA (sum assured).

(b) Premium paid in order to keep in force an insurance on the life of the assessee / Spouse / any child and in the case of HUF, under an insurance policy, (other than a contract for a deferred annuity) issued on or after 1^st  April 2012 shall be eligible for deduction to the extent of 10% of the actual capital SA (sum assured).

Where as the policy issued on or after 1st April 2013 for,

(i) A person with severe disability / a person with disability as referred to in section 80U, or

(ii) Any person who is suffering from ailment or disease as mentioned in the rules made under Sec 80DDB. Deduction under section 80DDB is to the extent of 15% of the actual capital SA.

(c) Contribution to deferred annuity Plans in order to keep in force a contract for deferred annuity,  on his own life / spouse / any child, provided such contract doesn’t contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for deduction.

(d) Contribution to Annuity Plans like New Jeevan Dhara , New Jeevan Dhara – I & Jeevan Akshaya – VI.

2) Lic Policy Tax benefits for Jeevan Nidhi Plan and New Jeevan Suraksha – I Plan (Under sec. u/s 80CCC)

Lic Policy Tax Benefits under Section 80CCC are,

A deduction to an individual for any amount paid by him from his taxable income in the above annuity plans for receiving pension (from the fund set up by the Corporation under the Pension Scheme) is allowed.

Note: Under section 80C, 80CCC and 80CCD(1) the aggregate amount of deduction shall not in any case exceed 1 lac. However, there is no sectoral cap. That is the limit of Rs. One Lakh can be exhausted by paying premium under any of the said sections.

3) Lic Policy Tax Benefits : Deduction under section 80D

Lic Policy Tax Benefits under Section 80D are,

(a) Deduction allowable upto Rs. 15,000  if you paid an amount to keep in force an insurance on health of assessee / his family / any contribution made to the central Government Health Scheme / on account of health check up of the assessee or his family.

(b) Additional deduction upto Rs. 15000 if you paid an amount to keep in force an insurance on health of parents /  on account of health check up of the parent of the assessee, whether dependent or not.

(c) In case of HUF (Hindu Undivided family),  deduction is allowable upto Rs. 15000 if an amount is paid to keep in force an insurance on health of any member of that HUF.

(d) Deduction will be up to Rs. 20000, if the sum specified in (a) / (b) / (c) is paid to keep in force an insurance on the health of any person specified therein who is a senior citizen (the person who is of 60 years or more during the previous year)

(e) If the amounts are paid in (a) or (b) or (c) on account of preventive health check up, the deduction shall be allowed to the extent it does not exceed in aggregate Rs. 5000.

(f) For the deduction purpose, the payment shall be made by

i. Any mode, including cash. In respect of any sum paid on account of preventive health check – up.

ii. Any mode other than cash in all other cases.

g) The insurance as mentioned above shall be in accordance with the scheme framed by

i. The General Insurance Corporation of India as approved by the Central Government in this behalf or;

ii. Any other insurer and approved by the Insurance Regulatory and Development Authority.

4)  Lic policy Tax Benefits : Jeevan Aadhar Plan (Sec.80DD) :

Lic Policy Tax Benefits under Section 80DD are,

• Deduction from total income upto Rs.50000/- allowable on amount deposited with LIC for maintenance of an handicapped dependent.
• Rs.1,00,000/- where handicapped dependent is suffering from severe disability.

5) Lic Policy Tax Benefits : Exemption in respect of commutation of pension under Jeevan Suraksha & Jeevan Nidhi Plans:

Lic Policy Tax Benefits – Under Section 10(10A) (iii) of the Income-tax Act, any payment received by way of commutations of pension out of the Jeevan Suraksha & Jeevan Nidhi Annuity plans is exempt from tax benefits. For more information visit www.taxqueries.in

6) Lic Policy Tax Benefits : Income tax exemption on Maturity/Death Claims proceeds under Section 10(10D)

Lic Policy Tax Benefits under Section 10(10D) are,

As per Section 10 (10D) of the Income Tax Act, 1961, any sum received under a Life Insurance, including the sum allocated by way of bonus on such policy is exempt from Lic Policy tax benefits where the sum is received as a death benefit.

However, to get exemption under above section for sum received other than death benefit,

i) Insurance shall not be issued under Section 80DD(3), or

ii) Insurance shall not be issued as a Keyman Policy, or

iii) Policy which has been issued on or after 1st April, 2003 and if the premium paid in any of the years during the policy term shall not exceed 20% of the Actual Capital SA.

iv) Policy which has been issued on or after 1st April, 2012 and if the premium paid in any of the years during the policy term shall not exceed 10% of the Actual Capital SA.

Where as the policy issued on or after 1st April 2013 for,

(i) A person with severe disability / a person with disability as referred to in section 80U, or

(ii) Any person who is suffering from ailment or disease as mentioned in the rules made under Sec 80DDB. Deduction under section 80DDB is to the extent of 15% of the actual capital SA.