Hello Sir, on 28/09/2003., I have purchased Jeevan Asha - II (Plan-131) with sum assured of Rs. 500000 (five lakh) for Half-Yearly Premium of ? 16,917.00 (annual premium of ? 33834). I had paid all the instalments and policy matured on 28/09/2023. lic paid me maturity amount with deduction of Tax (TDS-194DA) of ? 16,180 on (? 3,23,600 a part of maturity amount) on 8/09/2023. The calculation of maturity amount by LIC was as follows: 1. Basic amount ?400000 2. Bonus ?700000. 3. Any other RCT. ? 251800. 4. Total ? 1351800. 5. Income tax ? 16180 on ? 3,23,600. Paid in my bank account ? 1345620. Sir, Why LIC have deducted TDS? (the annual premium was less than 20% of Sum assured and the policy commenced in September 2003 and there is no tax on maturity on these policies). Sir, how to calculate my tax liability considering me in higher bracket of 30%. Thanking you.

Ans: You're right, there seems to be a misunderstanding regarding the TDS deduction on your Jeevan Asha-II policy maturity amount. Here's a breakdown:

TDS on Maturity: Generally, for pre-2014 ULIPs and traditional endowment plans like Jeevan Asha-II, maturity proceeds are exempt from tax if the annual premium doesn't exceed 20% of the sum assured. In your case, the premium amount seems to be well below the 20% limit.

Possible Reasons for TDS: There could be a few reasons for the TDS deduction:

Technical Error: An error in LIC's system might have triggered the TDS deduction.
Change in Rules: While the rule generally applies to pre-2014 policies, there might have been a specific clarification or change applicable to your policy.
Recommendations:

Contact LIC: Get in touch with LIC's customer care or your agent. Explain the situation and the relevant tax rule. Request clarification on the reason for TDS deduction and explore the possibility of a refund if it was an error.
Tax Return Filing: While filing your Income Tax Return (ITR), you can mention the maturity amount received, the TDS deducted (Rs. 16,180), and the exemption clause applicable to your policy (premiums below 20% of sum assured). This will help you claim the deducted TDS amount if it wasn't justified.
Calculating Your Tax Liability:

Since the maturity amount is likely exempt from tax, you don't need to calculate any additional tax liability on it (assuming you haven't received any taxable bonuses). However, your total income for the year will determine your tax bracket (30% in your case) and the tax applicable to your other income sources.

Remember: For specific advice on your situation and the possibility of an LIC error or rule change, consulting a tax advisor familiar with LIC policies and tax rules for pre-2014 plans might be helpful.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in