If you are reading this article, then chances are that you do not like taxes, very much; nobody does and that’s fine. According to the section C of Income Tax Act, 1961 you can be exempted from your income taxes if you have enrolled yourself in the Life Insurance Corporation (LIC). In case you knew this, this article would be like a revision. If not then it would provide you with a brief edification of the section C of the Income Tax law of 1961 and the tax exemption plans from LIC.
LIC or the Life insurance Corporation is one of the most respected names in life insurance. Being a public sector organization, the company has great support and is backed up by the Government of India. Life insurance Corporation is providing a wide range of insurance products which suit the demands of thousands of insurance seekers every year.
As you might be aware, when your salary increases, your tax becomes your number one enemy. At this stage you might be concerned about the tax deduction on your earnings from your insurance plan. If you are willing to invest, there are numerous life insurance policies currently available which will allow you to save up quite a bit on your taxes thereby allowing you to yield much better returns on your investments.
Tax Benefits on The LIC Policies
Tax exemption offered under section 80 C on life insurance policies
- This income tax article states that if you have purchased a life insurance from the Life Insurance Corporation on or before 31st March 2012 by your own name or by the name of your spouse or children, then you will be eligible for a 20 percent tax deduction on the premium amount that you would be paying towards your plan.
- If you have bought the insurance after April 1st 2012, then you are eligible for a 10 percent tax deduction on the premium amount that you would be paying towards your plan. This however assumes that you have bought the insurance under your own name.
- The paid premiums towards annuity deferred are also eligible for certain tax deductions.
Tax exemptions under 80 CCC
- Both the tax benefits that fall under 80 C and 80 CCC can be availed by the individual assesse and the HUF assesse.
- In case the premium paid for a particular financial year is more than 20 percent of the original capital sum assured, the tax benefits would be only be applicable for 20 percent of the assured sum.
- The max total of deduction that you would be able to claim is Rs.1, 50,000.
Tax Exemptions on LIC plans under section 80 D
- If you have purchased a Life Insurance corporation plan and deposited some money for the support of a handicapped person, then you would be eligible for tax benefits up to Rs.50, 000 for the first year. In case there is a serious disability, the eligible amount would be Rs.1, 00,000.
- These tax benefits can be availed by HUDs (Hindu Unified Family) and by the individual assesses.
- The minimum qualifying amount for this tax deduction is Rs. 15,000
Tax benefits under the section 10(10 D)
- This tax benefit is only applicable if the main Life Insurance Corporation Policy was not issued under the section of 80 DD or as a key LIC policy
- The death claims and the maturity amounts received by an individual are eligible for tax benefits under the section 10 D
- Benefits which have been received as a sum assured under a Life Insurance Corporation Policy along with the bonus amount is not eligible for the tax deductions.
- The amount which is eligible for tax deductions is up to 20 percent of the actual assured sum that has been issued on or after 1st of April 2013.
- The amount which is eligible for tax deductions is up to 10 percent of the actual assured sum that has been issued after 1st of April 2012.
A Few Things to be kept in Mind Regarding LIC Tax Deductions:
- The maximum amount of deduction that is allowed is Rs.1, 50,000.
- The above point includes all of the other tax benefits availed under the income tax section 80 C act.
- The combined limit for maximum amount of tax deduction under the acts 80C, 80CCC and 80 CCD of Income Tax Regulations is Rs.1, 50,000.
Investing in life insurance clearly does have some great tax exemptions. People have invested in Life Insurance corporation plans in the earlier years will surely benefit from these Income Tax Sections, thereby allowing them to save a lot more of their hard earned money for future occasions.