LIC (Life Insurance Corporation of India) policies provide a dual advantage—financial security and significant tax savings. As tax planning becomes a priority for many, understanding the tax benefits associated with LIC policies in 2024 can help maximize savings and ensure compliance with prevailing tax laws.
1. Tax Deduction Benefits: Section 80C
Under Section 80C of the Income Tax Act, policyholders can claim tax deductions on premium payments made toward LIC policies.
- Deduction Limit: Up to ?1.5 lakh per annum.
- Eligible Policies: Policies taken for self, spouse, and dependent children.
Example: If you pay ?1.5 lakh in LIC premiums annually, you can reduce your taxable income by the same amount, thereby saving tax under Section 80C.
2. Health Insurance Benefits: Section 80D
LIC policies with health-related riders also offer deductions under Section 80D:
- Standard Individuals: Claim up to ?25,000 per annum.
- Senior Citizens: Enhanced deduction limit of ?50,000 per annum.
These deductions cover premiums paid for health insurance riders attached to LIC policies, providing added financial relief.
3. Policy Features and Benefits
Maturity Benefits: Section 10(10D)
The maturity proceeds from LIC policies are generally tax-free under Section 10(10D).
- Tax-Free Payouts: Lump-sum payments and periodic payouts.
- Exclusions: Proceeds from policies where the premium exceeds 10% of the sum assured may be taxable.
Investment Options
LIC offers various investment-linked insurance plans that cater to diverse financial goals:
- Traditional Endowment Policies: Guaranteed returns over a fixed period.
- Unit-Linked Insurance Plans (ULIPs): Market-linked returns with partial tax benefits.
- Money-Back Plans: Periodic payouts during the policy term.
4. Special Provisions in LIC Policies
Dependent Coverage
Special provisions exist for policyholders with disabled dependents, offering additional financial security and tax benefits.
- Deferred Annuity Option: Available with a minimum purchase price of ?50,000.
Loan Facility
Policyholders can avail of loans against their LIC policies:
- Eligibility: After three months from policy issuance or post-free-look period.
- Loan Amount: A percentage of the policy’s surrender value.
5. Tax Slabs for FY 2024-25
Below are the income tax slabs applicable for FY 2024-25:
| Income Range | Tax Rate |
|---|---|
| Up to ?3 lakh | Nil |
| ?3 lakh to ?7 lakh | 5% |
| ?7 lakh to ?10 lakh | 10% |
| ?10 lakh to ?12 lakh | 15% |
| ?12 lakh to ?15 lakh | 20% |
| Above ?15 lakh | 30% |
6. Key Updates for 2024
- Standard Deduction increased to ?75,000.
- Family Pension Deduction has been enhanced.
- New Tax Regime is now the default option, with the flexibility to opt for the old regime if preferred.
Conclusion
LIC policies continue to be a cornerstone for tax-saving and financial planning in India. However, tax laws are subject to change, so it is advisable to stay updated and consult a tax professional for personalized advice. By leveraging the tax benefits offered by LIC, you can secure your future while optimizing your tax savings.
