LIC Tax Benefits at a Glance
| Section | What it covers | Limit | Old Regime | New Regime |
|---|
| Section 80C | LIC premium paid (and other investments) | Up to ₹1,50,000 | ✅ Yes | ❌ No (only NPS via 80CCD(1B)) |
| Section 80CCC | Pension / annuity plans including LIC pension schemes | Within 80C limit of ₹1,50,000 | ✅ Yes | ❌ No |
| Section 10(10D) | Tax-free maturity / death benefit | No limit (conditions apply) | ✅ Yes | ✅ Yes |
| Section 80D | Health insurance (LIC Health Plus plans) | Up to ₹25,000-₹1,00,000 | ✅ Yes | ❌ No (except for NPS) |
Section 80C Deduction on LIC Premium
Under Section 80C of the Income Tax Act, 1961, you can claim a deduction for the premium paid towards your LIC policy. The deduction is available under the Old Tax Regime and is part of the overall ₹1,50,000 limit (which includes PPF, ELSS, EPF, home loan principal, etc.).
Tax Saving = min(LIC Premium, ₹1,50,000) × Your Income Tax Slab Rate
Example
Ramesh earns ₹15,00,000 per year and pays ₹50,000 as LIC premium. He is in the 30% tax slab. His tax saving on LIC premium:
- Deduction allowed: ₹50,000 (within 80C limit)
- Tax saved: ₹50,000 × 30% = ₹15,000 per year
- Over 20 years: ₹3,00,000 total tax saved
Section 10(10D) — Tax-Free Maturity
Under Section 10(10D), the maturity amount you receive from an LIC policy is completely tax-free, provided the premium-to-Sum-Assured ratio meets one of these conditions:
- For policies issued on or after April 1, 2012: Annual premium ≤ 10% of Sum Assured
- For policies issued before March 31, 2012: Annual premium ≤ 20% of Sum Assured
- For policies issued on or after April 1, 2023 (with annual premium above ₹5 lakh): Sum Assured must be at least 10× the annual premium
Death benefit is also fully tax-free under Section 10(10D) for any LIC policy, regardless of the premium amount.
New Tax Regime vs Old Tax Regime (FY 2025-26)
| Income Slab (₹) | Old Regime Rate | New Regime Rate |
|---|
| 0 - 3,00,000 | Nil | Nil |
| 3,00,000 - 7,00,000 | 5% | 5% |
| 7,00,000 - 10,00,000 | 20% | 10% |
| 10,00,000 - 12,00,000 | 30% | 15% |
| 12,00,000 - 15,00,000 | 30% | 20% |
| 15,00,000 - 50,00,000 | 30% | 30% |
| Above 50,00,000 | 30% + surcharge | 30% + surcharge |
* The new tax regime is the DEFAULT from FY 2024-25. To claim 80C, you must opt for the old regime when filing your ITR. Standard deduction of ₹75,000 (new) / ₹50,000 (old) is included.
How to Claim LIC Tax Benefits
- Pay your LIC premium — through any mode (online, NACH, ECS, cheque).
- Collect your premium receipt — available in your LIC portal, email or branch.
- File your ITR — claim deduction under Section 80C (Old Regime) by entering the premium amount in the relevant schedule.
- Keep proof for 6 years — IT department can ask for proof up to 6 years back.
- Verify TDS — if LIC deducts TDS on maturity (for policies not meeting 10(10D) conditions), verify in Form 26AS.
LIC Tax Saving Strategy
- ✅ Pay premium before March 31 each year to claim 80C deduction for that financial year.
- ✅ Choose yearly mode — easier to claim than monthly premiums.
- ✅ Keep premium ≤ 10% of SA — for tax-free maturity under 10(10D).
- ✅ Compare Old vs New regime — if you have many 80C investments, Old regime may save more tax.
- ✅ Use LIC for guaranteed tax saving — unlike ELSS or ULIPs, LIC gives guaranteed returns + tax benefit.
- ✅ Stack with NPS — claim additional ₹50,000 under 80CCD(1B) over and above 80C.
Common Mistakes to Avoid
Warning: If the premium exceeds 10% of Sum Assured, the maturity amount becomes partially taxable. Always choose a Sum Assured that's at least 10× your annual premium.
- ❌ Buying LIC just for tax saving — term insurance is more cost-effective for pure protection.
- ❌ Forgetting to file premium receipt — keep all receipts in a folder.
- ❌ Choosing New Tax Regime without comparing — Old regime may be better if you have many deductions.
- ❌ Not declaring maturity income — even if 10(10D) exempt, declare it in ITR.
- ❌ Missing the premium payment deadline — late payments may not qualify for 80C in that year.
Frequently Asked Questions
Is LIC premium eligible for 80C deduction?
Yes, LIC premium is eligible for deduction under Section 80C of the Income Tax Act, up to a maximum of ₹1,50,000 per year (combined with other 80C investments like PPF, ELSS, EPF, etc.). The deduction is available only under the Old Tax Regime.
Is LIC maturity amount taxable?
LIC maturity is tax-free under Section 10(10D), provided the annual premium is at most 10% of the Sum Assured (for policies issued after April 1, 2012). If the premium exceeds 10% of SA, the maturity becomes taxable.
Can I claim 80C on LIC premium under the new tax regime?
No, the new tax regime does not allow 80C deductions. To claim 80C on LIC premium, you must opt for the Old Tax Regime. However, the maturity benefit under 10(10D) is tax-free under both regimes.
Is LIC death benefit taxable?
No. The death benefit paid to the nominee is fully tax-free under Section 10(10D) for any LIC policy, regardless of the premium amount or the Sum Assured.
What is the maximum LIC premium for tax-free maturity?
For 10(10D) exemption, your annual premium should not exceed 10% of the Sum Assured. For example, if your Sum Assured is ₹10,00,000, your annual premium must be ₹1,00,000 or less.
Can I claim both 80C and 80D on the same LIC policy?
80C applies to life insurance (term, endowment, money-back). 80D applies to health insurance. These are separate sections. If you have an LIC Health Insurance plan, you can claim 80D in addition to 80C on your life insurance premium.
Do I need to submit LIC premium receipt to claim 80C?
You don't need to submit the receipt with your ITR, but you must keep it for your records. The IT department can ask for proof of payment during assessment. Keep receipts for at least 6 years.
Is LIC HRA or home loan tax benefit better?
80C (LIC), HRA exemption, and home loan interest (Section 24) are all separate deductions. HRA and home loan interest can be claimed in addition to 80C. Use all three to maximize your tax savings.
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