Tax liability of life insurance

Yes, you can deduct the premium paid to arrive at net taxable income form the policy.

Thanks a lot for your advice sir.  

There is a lack of clarity on this issue that in such cases, the income should be treated in which head, income from capital gains or other sources. In my view, in such cases, life insurance policy qualifies as a "capital asset" and hence income has to be shown as a capital gain and relevant computation done accordingly. First poremium paid can be considered as cost of acquisition and secomd onwards can be considered as cost of improvement.