Is income tax exempt in bonus declared on jeevan dhara annuity plan

The taxability of the bonus received from an LIC Jeevan Dhara plan depends on whether the proceeds are considered part of a maturity benefit or a pension (annuity) payment.

Key Tax Considerations

• Bonus as Part of Maturity/Vesting: Under Section 10(10D) of the Income Tax Act, any sum received under a life insurance policy (including bonuses allocated to it) is generally exempt from tax, provided the policy meets specific conditions—most notably that the annual premium does not exceed 10% of the sum assured (for policies issued on or after April 1, 2012).

• Bonus as Part of Annuity/Pension: LIC Jeevan Dhara is primarily an annuity (pension) plan. When the policy matures (vests), the accumulated corpus—which includes your sum assured, guaranteed additions, and bonuses—is typically used to purchase an annuity.

  • Commutation: You generally have the option to commute (withdraw in a lump sum) a portion of the corpus at the time of vesting. Under Section 10(10A), this commuted portion is often exempt from tax.

  • Annuity/Pension Payments: Once the remaining corpus is converted into a regular pension (annuity), those periodic payments are taxable as "Income from other sources" and are taxed according to your applicable income tax slab.

Summary

• At Vesting: If you commute a portion of your corpus (which includes the bonus), that lump sum is generally tax-exempt under Section 10(10A).

• As Pension: Any bonus that is incorporated into the corpus used to generate your regular pension will effectively form part of the "purchase price" of the annuity. While the bonus itself is not "taxed" separately, the resulting pension payments you receive are fully taxable.

Summary:

Bonus amounts in LIC's Jeevan Dhara plan are typically integrated into the total corpus at the time of maturity (vesting). The commuted portion of this corpus is generally tax-exempt, while the regular pension (annuity) payments you receive thereafter are taxable as income according to your tax slab.