LIC Jeevan Labh is a limited premium endowment plan that offers both life cover and maturity benefits. It’s a non-linked, with-profit plan, meaning it participates in bonuses declared by LIC.
This plan offers tax-saving benefits under 80C and 10(10D).
Is the ₹5 Lakh Maturity Amount Taxable?
The maturity proceeds of any life insurance policy, including Jeevan Labh, are exempt from tax under Section 10(10D) only if certain conditions are met:
Tax Exempt If:
- Policy issued before 1 April 2012: Premium should not exceed 20% of the sum assured.
- Policy issued after 1 April 2012 but before 1 April 2023: Premium should not exceed 10% of the sum assured.
- Policy issued on or after 1 April 2023:
- If aggregate premium exceeds ₹5 lakh in a financial year (for non-ULIP policies), Section 10(10D) exemption won’t apply unless it’s a death benefit.
So, if your annual premium was less than ₹5 lakh, the maturity amount is tax-free.
Example Scenarios
| Policy Details | Is ₹5 Lakh Taxable in AY 25-26? |
| Issued in FY 2019-20, ₹50,000 premium/year | No (Exempt under Sec 10(10D)) |
| Issued in FY 2023-24, ₹1.5L premium/year | No (Under ₹5L limit, so exempt) |
| Issued in FY 2023-24, ₹6L premium/year | Yes (Exceeds ₹5L, taxed if not death benefit) |
What If It’s a Death Benefit?
Any amount received by a nominee on death of a policyholder is 100% tax-free, irrespective of premium amount or issue date.
Maturity of the Policy
Under Section 10(10D) of the Income Tax Act, the entire maturity benefit received from the LIC Jeevan Labh policy is exempt from tax, regardless of the size of the payout. The tax benefits extend to the full payout, including all vested bonuses and final additional bonuses, if any. This is applicable only for the policies issued after April 1, 2012, and the tax exemption is only applicable if the annual premium does not exceed 10% of the sum assured.
How Will Tax Be Calculated If It’s Taxable?
If taxable, only the maturity proceeds minus total premiums paid is considered “income from other sources” and taxed as per your slab rate.
Key Takeaways
- Check the issue date and premium amount to know if exemption under Section 10(10D) applies.
- Death benefits are always tax-free.
- If premiums paid > ₹5L for policies issued after 1 April 2023, and it’s a maturity payout, then tax applies.
FAQs
Does the policy start date matter?
Yes. Policies issued before 1 Apr 2023 follow the old rules (no ₹5L cap) Policies issued on or after 1 Apr 2023 must meet the new ₹5L premium rule. So a Jeevan Labh bought in 2024 with high premiums could be taxable, while an older one won’t be.
Is the death benefit taxable?
No. Any insurance payout received on the policyholder’s death is fully exempt. The ₹5L premium rule applies only to survival/maturity payouts, not death claims.
Will LIC deduct TDS on maturity amount?
If the amount is taxable, and exceeds ₹1 lakh, LIC may deduct TDS @ 5% under Section 194DA.
Where should I report taxable LIC maturity?
Under “Income from Other Sources”
CAclubindia
