Important Income tax benefits available under various plans of life insurance:
1) Deduction allowable from income for payment of Life Insurance Premium (Sec. 80C).
(a) Life Insurance premium paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or any child of assessee & in the case of HUF, premium paid on the life of any member thereof, deduction allowed upto 20% of capital sum assured during any financial year.
(b) Contribution to deferred annuity Plans in order to effect or to keep in force a contract for deferred annuity, on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for education.
(c) Contribution to Pension/Annuity Plans – New Jeevan Dhara-I & Jeevan Akshaya – VI
2) Jeevan Nidhi Plan & New Jeevan Suraksha – I Plan (U/s. 80CCC)
A deduction to an individual for any amount paid or deposited by him from his taxable income in the above annuity plans for receiving pension (from the fund set up by LIC under the Pension Scheme) is allowed.
NOTE: The premium can be paid upto Rs.1,00,000/- to avail deduction u/s.80C, 80CCC & 80CCD (80CCD- Deduction in respect of contribution to pension scheme of Central Government.).
However, there is no sectoral cap i.e. the limit of Rs.1,00,000/- can be exhausted by paying premium under any of the said sections.
3) Investment under long-term infrastructure bonds notified by the Central Government. (Sec. 80CCF)
A deduction up to Rs.20,000/- is available to individuals and HUF for amount paid or deposited as subscription to long-term infrastructure bonds notified by the Central Government. This is in addition to Rs.1 lakh deduction available under section 80C.
4) Deduction under section 80D
a) Deduction allowable upto Rs.15,000/- if an amount is paid to keep in force an insurance on health of assessee or his family (i.e. Spouse & children)
b) Additional deduction upto Rs. 15,000/- if an amount is paid to keep in force an insurance on health of parents
c) In case of HUF, deduction allowable upto Rs.15,000/- if an amount is paid to force an insurance on health of any member of that HUF
Note: If the sum specified in (a) or (b) or(c) is paid to effect or keep in force an insurance on health of any person specified therein who is a senior citizen,then the deduction available will be upto Rs.2,000/- provided that such insurance is in accordance with the scheme framed by
a) the General Insurance Corporation of India as approved by the Central Government in this behalf or;
b) Any other insure and approved by the Insurance Regulatory and Development authority.
5) Jeevan Aadhar Plan (Sec.80DD) :
Deduction from total income upto Rs.50000/- allowable on amount deposited with LIC of India under Jeevan Aadhar Plan for maintenance of a handicapped dependent (Rs.1,00,000/-where handicapped dependent is suffering from severe disability)
6) Exemption in respect of commutation of pension under Jeevan Suraksha & jeevan Nidhi Plans:
Uder Section 10(10A) (iii) of the Income-tax Act, any payment received by way of commutations of pension out of the Jeevn Suraksha & Jeevan Nidhi Annuity plans is exempt from tax under clause (23AAB).
7) Income tax exemption on Maturity/Death Claims proceeds under Section 10(10D)
Under the Previous of section 10 (10D) of the Income-tax Act, 1961, Maturity/Death claims proceeds of life insurance policy, including the sum allocated by way of bonus on such policy (other than amount to be refunded under jeevan Aadhar Insurance Plan in case of handicapped dependent predeceases the individual or amount received under Keyman Insurance Plan) is exempted from income-tax. However any sum (not including the premium paid by the assessee) received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20% of the actual capital sum assured will no longer be exempted under this section.