financial services · Taxation

Deductions Allowed In Income Tax Payment For Life Insurance Plan

Life insurance policies are not only a life securing scheme, but also get attractive deductions during tax filing online. The tax benefits it offers are valid on capital invested, premium paid and the total maturity amount if it does not cross the prescribed threshold limit. According to section 80 of Income Tax Act, the maturity amount is exempted from tax liability and also no TDS will be cut from that amount. If the policy is under your family member’s name then they will receive the exemption on the total maturity amount.

However, according to section 80DD, up to INR 50,000  of deduction is allowed for each individual during tax filing online. The deduction will go higher up to INR 75,000 if the person has severe disabilities. But any amount received under the Keyman Insurance Policy is not exempted from tax liabilities and also amount received on death of a policy taker are not exempted from tax liabilities. Other than these rules, all amounts received under these policies are exempted from any tax liabilities during tax filing online. Also, if the amount of premium paid is more than 10% of the sum assured then, the policy will be taxable and this rule is active from policy taken on or after 01/04/2012. If the policy exceeds the threshold of INR 1 lakh in a financial year, then it is liable to pay TDS on it.

To claim the LIC deductions, you must declare the details during tax filing online and you will get to know if you are liable to pay any TDS or not.  TDS will be cut only if the amount exceeds the limit of the mentioned amount described in section 80DD and 10 (10D). Also, if the policy taker is unable to produce PAN details, then 20% TDS will be cut from the amount payable. In case of exceeding the limit and availability of PAN details, only 2% TDS will be cut off. To get better understanding of the LIC and related exemptions, you can approach a professional CA before tax filing online.

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