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5 min read
Updated on Jan 05, 2023
Life Insurance Corporation (LIC) of India pays a policyholder a sum of money as maturity benefit at the end of the policy term if the insured outlives the policy tenure. This amount is generally equal to the sum assured of the insurance policy at the time of maturity together with bonuses.
The proceeds of life insurance policies, including death and maturity benefits, allow tax benefits. However, there are some limitations in terms of liability to taxation that everyone should be well aware of. In this post, we will discuss if the LIC maturity amount is taxable or not and other details.
Let’s understand LIC maturity taxability by means of an example. Suppose you bought a life insurance policy of INR 10 lakh as sum assured for 10 years tenure. Now, when your tenure ends and if you outlive the policy period, LIC is likely to pay you the complete sum assured. This amount is called the maturity benefit.
There are some plans which allow an enhanced sum assured in the form of additional bonus earned through various guaranteed additions as well as loyalty accumulations. This boosts the maturity amount of the LIC policy. However, do you know if the LIC maturity amount is taxable?
Read More: LIC vs Other Private Insurance Companies in India – Know Differences
The total sum assured received as maturity benefit for surviving a life insurance policy of LIC is tax-free including the bonus as per section 10(10D) of IT. However, there are some eligibility criteria or conditions that need to be fulfilled to enjoy the tax-free maturity. Here, the sum assured of the life insurance policy and the premium amount is required to be in a particular ratio.
Let’s take a look at the different conditions of taxability of life insurance maturity amount of LIC.
Also Read: How to Calculate LIC Installment Premium Amount Without Tax
Below are the conditions under which the maturity amount of LIC insurance policies are taxable –
For example, if you buy a life insurance policy from LIC of India with a coverage amount of INR 10 Lakh, your annual premium should be less than INR 1 Lakh to enjoy tax-free returns.
So, the maturity benefit in the above mentioned cases is added to the annual income of the insured and tax is levied on the total amount as per the tax slab that is applicable. In addition, the entire maturity benefit is levied with a 1% TDS, which is deducted from the amount before paying it to the insured by the insurer.
Also Know: How to Surrender LIC Policy Online Before Maturity
Apart from the conditions mentioned above, the maturity amount in the rest of the conditions come under the category of entirely tax-free.
Let us take a look at some of the top life insurance plans offered LIC of India below.
Now that you know about tax-free benefits on LIC policy maturity, below are some of the popular LIC life insurance plans to invest in:
LIC Policy | Plan Type | Entry Age | Term of Policy | Maturity Age | Sum Assured |
LIC Tech Term Plan | Term Insurance | 18 to 65 years | 10 to 40 years | 80 | INR 50 lakh – no limit |
LIC Jeevan Amar | Term insurance | 18 to 65 years | 10 to 40 years | 80 | INR 25 lakh – no limit |
LIC Jeevan Umang | Whole life + Endowment plan | 90 days to 55 years | 100 years minus the entry age | 100 | INR 2 lakh – no limit |
LIC New Jeevan Anand | Endowment plan | 18 to 50 years | 15 to 35 years | 75 | INR 1 lakh – no limit |
Read More: Download LIC Premium Payment Receipt Online in Simple Steps
Final Words
LIC of India offers many lucrative policies and deals to benefit the common people. People generally like to know – LIC maturity amount is taxable under which head/section. The maturity amount of LIC policy is completely tax-free under Section 10(10D) if the conditions mentioned in the blog above are maintained. Further, investing in a LIC tax saving plan early-on in life helps by lowering the tax deductions, while saving more.
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Also Read: Best LIC Senior Citizen Saving Scheme and Policy 2022-23
Yes, LIC allows tax exemptions under section 80C on life insurance policies. If the policyholder has bought a life insurance policy on or before March 31, 2012 for him/herself or for spouse, child etc., he/she can get up to 20% of tax deduction on the premium. To claim deduction on the premium of life insurance policy, you can file under section 80C. For individuals, tax exemption can be availed if the policy is bought in the name of taxpayer, spouse or children. If you have purchased your life insurance plan after 1 April, 2012, and the premium you are paying annually is more than 10% of policy sum assured, the maturity benefit would be taxed under section 10 (10D) and as per your income slab. Else, you can enjoy tax-free maturity. The maturity amount can be claimed at the branch office of your LIC policy. In fact, the branch will send a letter to the policyholder two months prior to the date of the maturity informing the details of the payment to be received. Yes, death benefit for term plans as well as permanent life insurance plans that is received by the nominee of the plan is tax- free. Once your life insurance policy reaches maturity, you get the maturity benefit as a lump sum amount paid by the insurer. For example, if the life insurance plan has a 20 year term, the insured will get the maturity benefit at the end of 20 years if he/she outlives the term of the policy.FAQs on Is LIC Maturity Amount Taxable?
Does LIC allow exemption from income tax?
Where to declare LIC policy while filing for income tax?
Is life insurance of LIC maturity amount taxable?
Where can I claim LIC maturity benefit?
Is the death benefit earned under permanent life insurance tax free?
What happens to my life insurance policy after it matures?
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
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