Is the entire amount received from LIC policy 131 taxable after maturity?

Ans: Here you have not mentioned the type of policy (ULIP / Traditional) for us to give a detailed analysis.

For life insurance plans issued after April 1, 2012, the exemption from tax on single premium life insurance is valid only when the premium is less than 10% of the total sum assured.

Now, if the policy is taken before April 2012, you could avail the exemptions under Section 10D if the premiums paid in a single year during the policy term are not more than 20% of the sum assured. You will need to show the entire maturity proceeds in your return if taxable.

The entire premium of a life insurance plan is eligible for a tax deduction as per Section 80C up to a maximum limit of Rs 1.5 lakh. 

Ans: The enhanced survival benefit of LIC Jeevan Asha 2 policy with option 2 is likely taxable on maturity.

Here's why:

Income tax rules in India generally consider money received under a life insurance policy, besides the maturity benefit or death benefit, as taxable income. This includes benefits received for specific situations like critical illness or surgical procedures.

The enhanced survival benefit under option 2 is essentially a lump sum amount withdrawn before the policy matures. It's meant to be used for meeting hospital expenses in case of emergencies.

Therefore, this benefit falls under the category of money received before maturity and is likely taxable.

Recommendation:

It's advisable to consult a tax advisor for specific guidance on your situation. They can consider your tax bracket and other factors to determine the exact tax implications of availing the enhanced survival benefit.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: The enhanced survival benefit under Option 2 of LIC Jeevan Asha 2 is considered taxable income in India. Here's why:

Option 2: This option allows you to withdraw a lump sum amount for meeting hospital expenses in case of a surgical procedure.

Income Tax Rules: According to the Income Tax Act, any money received under a life insurance policy, except for the maturity benefit or death benefit, is considered taxable income. This includes benefits received for specific situations like critical illness or surgical procedures.

Therefore, the enhanced survival benefit withdrawn under Option 2 will be added to your mother-in-law's taxable income for the year.

It's essential to consult with a tax advisor or Certified Financial Planner (CFP) to understand the specific tax implications based on your individual circumstances and prevailing tax regulations. They can provide personalized guidance tailored to your financial situation and help you make informed decisions regarding your insurance policy.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

Ans: 01. You have to show full details of the policy, i.e., Sale/Maturity amount received, its Cost (Premiums paid) & Net Gain.
02. You are supposed to pay your tax, if any & also claim credit for TDS deducted.
03. I suppose, Bonus received by you during the policy period, would have been declared in your ITRs of previous years.
Most welcome for any further clarifications. Thanks.