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Should I pay tax on my matured LIC Jeevan Asha II policy?

Ramalingam

Ramalingam Kalirajan  |9854 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 02, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Sidharth Question by Sidharth on Jul 21, 2024Hindi
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Hello. I have an LIC Policy - Jeevan Asha II that was started in 2003. I have been paying yearly premiums, and it matured in 2023. The premiums were ~30k yearly paid till 2022(i.e 20 years), and the Table & Term was 131 - 20. Now in 2023 I have received maturity amount of ~12lc and LIC deducted TDS of ~45k. Does this mean the interest income added to my income from this would be 4.5Lc? Or are there any tax rebates for LIC policies that were started that long ago?

Ans: Policy Overview

Your LIC policy matured in 2023.
You received a maturity amount of around Rs. 12 lakhs.
LIC deducted a TDS of Rs. 45,000.
Interest Income and Tax Implications
TDS indicates interest income is added to your income.
In this case, the interest income appears to be Rs. 4.5 lakhs.
Interest income from such policies is taxable.
Tax Rebates for Old LIC Policies
Policies started before 2012 might have different tax rules.
Check if your policy qualifies for any old tax exemptions.

Assessing the Financial Outcome
Your premiums were about Rs. 30,000 yearly.
You paid premiums for 20 years.
Evaluate if the maturity amount meets your financial goals.

Evaluating Investment Options
Consider reinvesting the maturity amount.
Actively managed funds can offer better returns.
Engage a Certified Financial Planner for personalized advice.
Avoiding Index Funds and Direct Funds
Index funds have limited potential in volatile markets.
Actively managed funds provide better risk management.
Regular funds through an MFD with CFP offer professional guidance.

Final Insights
Analyze your overall investment strategy.
Ensure your investments align with your financial goals.
Regularly review and adjust your portfolio for optimal performance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |9854 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 09, 2024

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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

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