If you have purchased or are looking to purchase LIC Jeevan Shanti policy, this post is for you. It answers questions about taxation related to this policy.
What is the Jeevan Shanti policy?
LIC new Jeevan Shanti plan is a pension plan that offers annuities. The policyholder can either buy an immediate annuity with the premium or invest in a single-premium, deferred-annuity plan. In the former option, the insurer starts annuity payments immediately after the buyer purchases the policy. However, in the latter option, it starts annuity payments after a deferment period.
Moreover, you can choose to take the annuity on a single life or a joint life basis. The latter means that the insurer continues to pay the annuity to the surviving spouse if the primary annuitant (i.e., the recipient of the annuity) dies early.
LIC Jeevan Shanti Policy & Taxation on Annuity
For annuitant
The tax treatment of pension plans is different from that of other life insurance plans. Section 80CCC allows for a deduction of up Rs 1.5 lakh on the premium.
The annuity payments, however, are taxable. The annuity that the annuitant receives under the plan becomes an income when calculating tax. Therefore, it becomes part of taxable income and attracts tax according to the annuitant’s income tax slab.
For nominee
If the annuitant passes away, the nominee can avail of the policy benefits either in lumpsum or in annuity pay-outs or in monthly installments. However, the annuitant makes this choice and the nominee cannot change it. If the annuitant chooses for the death benefit to be paid out in lump sum or in installments over a period of 5, 10, or 15 years, the sum would be tax-free. This is allowed under Section 10 (10D) of the Income Tax Act.
Let’s say that the annuitant selects the annuity option for paying the death benefit to the nominee. For taxation purposes, the death benefit then becomes a premium payment for an immediate lic annuity plan where the nominee becomes the annuitant. The annuity rates would depend on the age of the nominee. The annuity payments the nominee then receives become taxable income. The tax would now depend on the nominee’s income tax slab.
Although annuities are a benefit that insurers pay under a life insurance plan, just like a maturity or death benefit, they are taxable. It is advisable to learn the tax implications of pension plans before buying one. For help with questions on policies, the cover they offer, taxation, etc., drop us a mail at support@securenow.in or give us a call at 96966 83999.
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FAQs
1. What is the LIC Jeevan Shanti Plan?
LIC Jeevan Shanti Plan is a single premium annuity plan offered by Life Insurance Corporation of India. It provides a guaranteed income for life to the policyholder, along with the flexibility to choose from various annuity options based on their needs.
2. How does LIC Jeevan Shanti work?
In LIC Jeevan Shanti, the policyholder pays a lump sum premium amount upfront. In return, LIC provides a regular income in the form of annuity payments for the chosen term. The annuity payments can be received monthly, quarterly, half-yearly, or annually, as per the policyholder’s choice.
3. Who is eligible to purchase Jeevan Shanti LIC?
Individuals between the ages of 30 to 85 years can purchase Jeevan Shanti LIC. The plan offers different annuity options to suit the needs of various age groups and preferences.
4. How does the LIC Jeevan Shanti Plan Calculator work?
The LIC Jeevan Shanti Plan Calculator is a tool provided by LIC to help individuals calculate the premiums and benefits of the Jeevan Shanti Plan based on their age, premium payment frequency, and coverage amount. By inputting these details into the calculator, you can get an estimate of the premium you would need to pay and the benefits you would receive under the plan.
5. How does the New Jeevan Shanti plan work?
Under this plan, policyholders make a one-time lump sum payment as a premium and can choose between immediate annuity and deferred annuity options. Immediate annuity provides regular income payouts starting immediately, while deferred annuity offers the flexibility to start receiving income at a later date. The plan also offers various annuity options to suit different needs and preferences.
