Life insurance policies can be used as tax planning tool as premium paid on Insurance Policies is eligible for tax benefits under Section 80C of the Income Tax Act 1961 (Act) and Maturity Proceeds are also eligible for exemption under section Section 10(10D) and Section 10(10A)(iii). Life Insurance helps Assessee in tax saving , achieving their long term goals and it also provides Comprehensive financial protection against unforeseen events for your family.

Deduction U/s. 80C in respect of life insurance premium

Who is Eligible Assessee – Individual and Hindu undivided family.

Maximum Limit – Maximum Deduction allowed under this Section is Rs. 1.50 Lakh and the sum includes payment on other allowable investment option available Under Section 80C of the Income Tax Act,1961. It is to be further noted that combined Maximum limit of deduction under Sec 80C & 80CCC & 80CCD (1) is Rs 1,50,000.

Deduction limit: Deduction will be allowed only for premiums upto a maximum of 10% of the sum assured for policy issued on or after April 1, 2012. In case of policy issued before March 31, 2012, deduction will be allowed only for premiums upto a maximum of 20% of the sum assured.

Allowable on Payment- Only life insurance premia paid or deposited during the year are allowable as deduction under Section 80C.

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Disallowance: The deductions claimed earlier will be taxable as income if the policy is terminated either by notice or by failure to pay any premium in case of

  • Single premium policy: within 2 years after the commencement date
  • Regular premium policy: before premiums have been paid for 2 years.

On Whose Life insurance premia Can be Paid-

(i) in the case of an individual (Resident or Non Resident)

  • On his own life
  • On Wife/husband(dependent or not)
  • Child

-Major or minor (dependent or not)

– Married or unmarried Daughter / Son  (dependent or not)

(ii) in the case of a Hindu undivided family, any member thereof;

Also Read- Sec 80C deduction available on Life Insurance paid for adult children /married daughter

Premium Paid on life of parents, Brother, Sisters or In-laws not Eligible- Please note that life insurance premium paid by you for your parents (father / mother / both) Brother, Sisters or your in-laws is not eligible for deduction under section 80C.

More than one insurance policy- If you are paying premium for more than one insurance policy, all the premiums can be included.

Premium Paid to LIC and Other Insurance Companies- It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.

Premiums on pure endowment assurance policy – A pure endowment assurance policy is an assurance on the life of the assessee and hence the premium paid on such policy would be eligible to rebate under section 80C.

Taxability of Maturity Proceeds

Section 10(10D)

The proceeds under a life insurance policy are exempt under Section 10(10D) of the Act, subject to the provisions of the said section.

Section 10(10A)(iii)

Commuted Pension received from Pension fund (Pension Plans approved by IRDA) would be tax-free.

GST on Life Insurance Premium

All premiums and charges are subject to applicable taxes including GST, education cess and secondary and higher education cess as applicable under the prevailing tax laws.

(Republished with amendments)

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58 responses to “Life Insurance Premium- Tax benefit on Payment and Maturity”

  1. Krishna says:

    Hi Everyone, In Case of Defense personals there is deduction of Group Insurance Premium from the salary of the officers. Whether this deduction is to allowable under section 80C ?

  2. Apurba Kumar Pramanik says:

    when premium paid exceeds 20% of the sum assured, whether the whole maturity value is taxable or only the profit is taxable

  3. Kamalesh Sarkar says:

    Is premium paid under table no 814 of LIC from a partnership firm, tha amount of premium is deduct able from the net income of the firm. ?

  4. Dr sunil says:

    Is advance payment of a postal life insurance policy for the next year is rebatable under income tax rebate scheme

  5. Dr sunil says:

    Is advance payment of a postal life insurance policy for the next year in rebatable under income tax rebate scheme

  6. surendra kumar das says:

    Please be noted myself and my wife both are earning person and i want to buy an term plan where i will be the insured and the premium will be paid by my wife. kindly confirm can she claim Income tax benefit and what will be the percentage of tax benefit, Surendra Das 9321802609

  7. NITESH GUPTA says:

    WHEN PREMIUM PAID EXCEEDS 10%/20% OF THE SUM ASSURED, IS WHOLE OF THE AMOUNT RECEIVED ON MATURITY IS TAXABLE? OR ONLY PROFIT ACCRUING ON SUCH POLICY DEDUCTING THE PREMIUMS PAID?

    • Apurba Kumar Pramanik says:

      when premium paid exceeds 20% of the sum assured, whether whole of the maturity is taxable

  8. SURENDRA KUMAR GARG says:

    I HAVE RECEIVED PENSION FROM LIC RS.39500/ PER YEAR UNDER JEEVAN SURAKSHA POLICY. IS THE AMOUNT TAXABLE?

  9. Rajeev Singh says:

    Can wife clam LIC premium of husband and own parents

  10. Tushar More says:

    Sir, I have taken 5 LIC Bima Plus Plan policy on 2005 of Rs 2,00,000 each totalling Rs. 10,00,000. Now in year 2015, i have received the proceeds of Rs. 28 Lacs. My Query is since i am not eligible for deduction under sec 10(10D), whether the whole proceeds of 28 lacs shall be taxed or only the gain of Rs 18 Lacs shall be taxed under IFOS. Further, since my investment was made from taxed income and maturity amount is also taxable, it will amount to double taxation.Is there any relief in the ACT.

  11. Arun Rajput says:

    I am a grand parent. I am planning to buy LIC plan in the name of my grand children. Is this plan is eligible for Tax exemption under 80c. I shall be making all the premium payments.

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