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Anil

Anil Rego  |377 Answers  |Ask -

Financial Planner - Answered on Aug 29, 2022

Anil Rego is the founder of Right Horizons, a financial and wealth management firm. He has 20 years of experience in the field of personal finance.
He’s an expert in income tax and wealth management.
He has completed his CFA/MBA from the ICFAI Business School.... more
Kanyalal Question by Kanyalal on Aug 29, 2022Hindi
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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: 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. 

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  |7228 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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Ramalingam

Ramalingam Kalirajan  |7228 Answers  |Ask -

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

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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

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I am 39 and married for 11 years now, my husband doesn't support me financially at all. My salary is more than him but I bought house my own and paying all EMIS, looking for all household expenses and also paying school fees and other expenses for my son. My husband looks after only his parents, spend all money on them. Earlier we used to live together in inlaws house but they have spending habits for luxury, cloths, food etc even though my husband earns very less and my father in law retired with no income they were not ready to compromise on their spending habits. Whatever they had received after their retirement they entirety spent on their daughters marriages with no money left. When I got married they asked for my salary and used to give them. Mine and my husband salary was not enough for them so they sold house without informing me, I insisted them to buy at least small house but did not agree and kept on spending money on their lavish life, foreign trips, food, cloths etc. also helped daughters to buy house, maintenance and their childrens study. But did not let their son live life as ask him to pay rent for their house, household and maintenance expenses and they spend their money on their own luxury. They asked for my salary even though they have money and just spending for luxury and not even thinking for our future. When I denied to give salary, they asked me leave their house and made me difficult to live with them doing harrasment and taunts so I decided to leave and buy new house.Now I am living with my son separately, when my husband came to know about my new house he came to stay with us by not even paying single rupee to me. I asked him several time for money he only pays one or two thousand saying I don't have money at all to give you. Not taking care of son, his studies, school fees, do not help me in anything. My in laws keep doing his brain wash against me so that he will not support me financially or anyway. He always listens to his parents and sisters. There is no husband wife relationship at all between us. Not sure how to deal with it.
Ans: First, recognize and honor the strength it has taken to come this far. Buying a home, raising your son, and managing the weight of these challenges on your own are significant accomplishments that reflect your resilience and determination. That said, a marriage is meant to be a partnership, and it’s clear that your husband’s lack of financial contribution and emotional support has created an imbalance that’s unsustainable.

It’s important to look at the patterns in your relationship with clarity. Your husband’s decisions seem to be heavily influenced by his family, and this loyalty, while not inherently wrong, appears to come at the expense of his commitment to you and your shared responsibilities. The fact that he contributes so little financially and emotionally while benefiting from your efforts shows a lack of fairness and respect in the relationship. His parents’ behavior and expectations have added further strain, undermining your marriage and creating an environment of resentment.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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