March 31 marks the culmination of current financial year. In case you have not made any tax-saving investment so far, there are two more days to seize the opportunity before you actually miss the bus. You can make the investments for the purpose of saving, while also making provision for the purpose of availing income tax exemptions. Even for the previous years gone by: 2015-16 and 2016-17, one can file the belated income tax returns, however, the savings made now will not entitle the tax payer to avail the exemptions for the years that have lapsed, for the obvious reasons of course. The Income Tax Department has decided to keep its offices across the country open through March 31, despite government holidays on the occasion of Mahavir Jayanti (March 29) and Good Friday (March 30). LIC or Life Insurance Corporation offers several income tax benefits under its policies. Income tax laws that provide for tax benefits through LIC policies range from Section 10 to Section 80C of the Income Tax Act, 1961.
Here are some of the key income tax benefits you can claim from LIC Life Insurance policies for assessment year 2018-2019 (financial year 2017-2018):
Income tax deduction allowed under Section 80C of the Income Tax (I-T) Act on payment of LIC life insurance premium:
Section 80C of the Income Tax Act provides for income tax deductions up to Rs 1.5 lakh in a financial year. This benefit can be availed by investments in a variety of tax-planning instruments, including life insurance premium. Life insurance premium paid to continue a life insurance policy of self, spouse or any child is eligible for deduction under certain conditions. In case of HUF or Hindu Undivided Family, the premium paid on the life insurance policy of any of the members (other than a contract for a deferred annuity) is eligible for deduction under the same conditions.
(Also read: Income tax saving of up to Rs 45,000)
For the life insurance policies issued on or before March 31, 2012, deduction up to 20 per cent of the sum assured or premium paid, whichever is less, is applicable, according to the LIC website - licindia.in. For those issued on or after the April 1, 2012, deduction up to 10 per cent of the actual capital sum assured or actual premium paid, whichever is less, is allowed.
Contributions made in order to maintain a deferred annuity plan for self, souse or any child is eligible for deduction. However, this deduction is applicable only if the plan doesn't provide for receipt of cash payment for the insured in lieu of the payment of annuity. Contributions made for annuity plans New Jeevan Dhara , New Jeevan Dhara-I and Jeevan Akshaya are eligible for deduction under Section 80C, according to LIC.
Income tax deduction under Section 80U or Section 80DDB on payment of life insurance premium for physically challenged person:
For policies issued on or after April 1, 2013, premium paid on life insurance for an individual with disability or suffering from disease is eligible for deduction up to 15 per cent of sum assured or actual premium paid, whichever is less, under certain conditions. This deduction, according to the LIC website, is applicable to "a person with disability or a person with severe disability as referred to in section 80U" or a person "suffering from disease or ailment as specified in the rules made under section 80DDB".
Income tax deduction under Section 80CCC on investment in annuity plans
LIC's Jeevan Nidhi and Jeevan Suraksha Plans are eligible for deduction under Section 80CCC of the I-T Act. Individuals paying from their taxable income in these two annuity plans for receiving pension are eligible for deduction. "The aggregate amount of deduction under u/s 80C, 80CCC & 80CCD(1) shall not in any case exceed one lakh fifty thousand Rupees," LIC mentioned on its website.
Section 80CCC provides income tax deduction for investment in an annuity plan. This plan must lead to a pension from a fund referred to in Section 10(23AAB) of the Income Tax Act. The fund, to receive a pension, must be approved by the insurance regulator Insurance Regulatory Development Authority of India (IRDAI).
Pension received from annuity or amount received upon surrender of annuity - including interest and bonus - is taxable in the year of receipt, according to the LIC website.
Income tax deduction under 80D on health insurance premium
Premia paid for medical or health insurance for self, spouse, children and parents qualify for deduction under Section 80D of the I-T Act. Individuals can claim deduction up to Rs 25,000 for insurance premium paid for self, spouse, dependent children or parents. The deduction allowed is limited to Rs 25,000 for health insurance premium paid for self, spouse and children. For parents, an additional deduction of Rs. 25,000 is allowed for medical insurance premium. This amount, in all the cases given above, can go up to Rs 30,000 in case of senior citizens. For any amounts paid for a preventive health checkup, a deduction up to an aggregate Rs 5,000 is permitted.
Income tax deduction under Section 80DD for medical expense of physically challenged person
Section 80DD provides income tax benefit on medical expenses of physically challenged individuals, dependent on the assessee. Under its Jeevan Aadhar Plan, individuals can claim deduction up to Rs 75,000 on investment in LIC's Jeevan Aadhar or Jeevan Vishwas plans, according to the insurer's website. LIC Jeevan Aadhar and LIC Vishwas plans are focused on maintenance of individuals with disability. A deduction up to Rs.1.25 lakh is allowed in case the dependent suffers from severe disability, according to LIC.
Income tax exemption under Section 10(10A) on commutation of pension
Under Section 10(10A) (iii) of the I-T Act, any payment received by way of commutation of pension out of LIC's Jeevan Suraksha and Jeevan Nidhi Annuity plans is exempt from tax, according to the LIC website. Commuted amount refers to the amount accumulated against a pension scheme payable in lump sum, instead of regular instalments.
Income tax exemption under Section 10(10D) on maturity or death claims
Any amount out of maturity or death claim of a life insurance policy is eligible for tax exemption under Section 10(10D) of the I-T Act. This includes the sum allocated by way of bonus on such policy received as a death benefit.