I have paid Single Premium of Rs 100,000 for my son's LIC policy in the year 2012. In the year March 2022, the policy matured for Rs 200,814 and bonus of Rs 12,354. The entire amount was re-invested with additional premium amount of Rs 76,375 as single premium under plan of 917 for 25 years of LIC.

Will the difference amount of Rs 100,814 with bonus amount of Rs 12,354 attract tax? If so, under normal tax rate or LTCG?

Will the entire amount of Rs 289,543 entitled U/s 80C or only differential premium amount of Rs 76,375 be considered U/s 80C?

Shall be thankful for your views.

Ans: Under Section 10 10(D), the entire maturity proceeds will be taxable in the year of receipt and must be shown as income while filing one's income tax return.

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

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.