When it comes to managing your finances, buying an LIC policy can be a smart move. Not only does it provide life insurance, but it also helps you save on taxes. If you’re new to filing Income Tax Returns (ITR), understanding these benefits can seem a bit complicated. Let’s break it down step by step, using the example of the Jeevan Anand policy with a yearly premium of ₹1 lakh.
Understanding the Jeevan Anand Policy
The Jeevan Anand policy is a popular plan from LIC that combines life insurance and savings. Here’s what it means for you:
- Life Insurance: It provides financial support to your family if something happens to you during the policy term.
- Savings: It gives you a lump sum amount when the policy term ends, if you’re still around.
How Can You Save on Taxes?
The government allows you to save on taxes when you buy life insurance. Here’s how it works with the Jeevan Anand policy:
1. Saving Taxes on Premium Payments (Section 80C)
When you pay premiums for your Jeevan Anand policy, you can reduce the amount of income on which you have to pay tax. This is covered under a part of the law called Section 80C. Here’s how:
- Maximum Limit: You can reduce your taxable income by up to ₹1.5 lakh every year.
- Example: If you pay ₹1 lakh as an annual premium for the Jeevan Anand policy, you can subtract ₹1 lakh from your total income, which lowers the amount of tax you need to pay.
Simple Calculation:
- Your Total Income: ₹10 lakh
- Premium Paid: ₹1 lakh
- Taxable Income: ₹10 lakh – ₹1 lakh = ₹9 lakh
Tax Calculation (2024-2025):
- Without Policy:
- Taxable Income: ₹10 lakh
- Tax Rate: 10%
- Tax Payable: 10% of ₹10 lakh = ₹1 lakh
- With Policy:
- Taxable Income: ₹9 lakh
- Tax Rate: 10%
- Tax Payable: 10% of ₹9 lakh = ₹90,000
By purchasing the policy, you save ₹10,000 in taxes.
Othe scenerio to save further on Tax
Now, let’s consider another scenario where your taxable income, after PF deductions, is ₹8.5 lakh.
- Taxable Income after PF deduction: ₹8.5 lakh
- Tax Rate: 10%
- Tax Payable: 10% of ₹8.5 lakh = ₹85,000
By reducing your taxable income further, you can save an additional ₹5,000 compared to having a taxable income of ₹9 lakh.
What If Something Happens to You?
If you pass away during the policy term, your family will receive the death benefit. This amount is also tax-free under Section 10(10D).
Additional Points to Consider
- Keep the Policy Active: To enjoy these tax benefits, make sure to pay your premiums regularly.
- Avoid Surrendering Early: If you surrender the policy before it matures, you might have to pay tax on the surrender value.
- Policy Loans: You can take a loan against your policy if needed, without affecting your tax benefits.
Choosing the Right Agent
Picking the right LIC agent can make a big difference. A knowledgeable agent can:
- Help You Understand Policies: Explain the details in simple terms.
- Maximize Benefits: Show you how to make the most of your tax savings.
- Offer Discounts: Some agents might offer discounts or additional benefits, helping you reduce your premium payments.
Conclusion
Investing in LIC policies not only safeguards your financial future but also provides valuable tax-saving opportunities. By leveraging these tax benefits, you can make well-informed decisions and maximize the returns on your investment. For personalized advice and to benefit like reduced LIC premiums, contact us today. Our agency is dedicated to helping you make the most of your LIC policy.
