The LIC maturity amount, if taxable, needs to be appropriately disclosed in your Income Tax Return (ITR) form. For salaried individuals, this typically involves filing ITR-2, where the income should be disclosed under Schedule EI and, if taxable, also in Schedule OS.
Understanding the Taxability of LIC Maturity Proceeds
Before proceeding with ITR filing, it's essential to determine if your LIC maturity proceeds are taxable. Most life insurance maturity amounts are exempt from income tax under Section 10(10D) of the Income Tax Act, 1961, provided certain conditions are met:
- For policies issued on or after April 1, 2012: The annual premium payable for any year during the policy term must not exceed 10% of the actual capital sum assured.
- For policies issued between April 1, 2003, and March 31, 2012: The annual premium payable for any year during the policy term must not exceed 20% of the actual capital sum assured.
- For policies issued on or before March 31, 2003: Generally, no premium-to-sum-assured condition applies for exemption.
- Exclusions from Exemption: Certain proceeds are always taxable, such as those from a Keyman insurance policy or sums received under Section 80DD(3) or Section 80DDA(3).
If your policy does not meet these exemption criteria, the maturity amount will be considered taxable income.
Choosing the Correct ITR Form
The choice of ITR form depends on various factors, including your sources of income. For individuals with LIC maturity income:
| ITR Form | Applicability (Common Scenarios) | Key Income Sources |
|---|---|---|
| ITR-1 (Sahaj) | For individuals with income from salary, one house property, other sources (excluding lottery, racehorses, capital gains), and agricultural income up to ₹5,000. Not suitable if LIC maturity is taxable and complex. | Salary, Pension, Interest, One House Property, Other Sources (simple) |
| ITR-2 | Typically required for individuals who have income from salary, house property, capital gains (short-term or long-term), foreign assets/income, or taxable income from other sources (including LIC maturity). | Salary, House Property, Capital Gains, Other Sources (including taxable LIC maturity), Foreign Income |
| ITR-3 | For individuals and HUFs having income from profits and gains of business or profession. Covers all income sources of ITR-1 and ITR-2. | Business/Profession Income, Salary, House Property, Capital Gains, Other Sources |
For a salaried person receiving LIC maturity proceeds, ITR-2 is commonly the appropriate form, especially if the maturity income is taxable or if you have other complex income sources. You can find official ITR forms and instructions on the Income Tax Department's e-filing portal.
Reporting LIC Maturity in ITR-2 (For Salaried Individuals)
If you are a salaried person and are required to fill ITR-2 for a financial year such as FY 2022-23 (Assessment Year 2023-24), here’s how to disclose your LIC maturity income:
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Disclosure in Schedule EI (Exempt Income):
- As per the guidelines for ITR-2, the gross LIC maturity income should be disclosed under Schedule EI (Exempt Income).
- This schedule is specifically designed for reporting various types of income that are exempt from tax under different sections of the Income Tax Act. Even if a portion of your LIC maturity proceeds is taxable, the initial reporting of the total maturity amount often begins here to indicate the source of income from a life insurance policy.
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Reporting Taxable Portion in Schedule OS (Income from Other Sources):
- If the LIC maturity amount does not qualify for exemption under Section 10(10D) and is thus taxable, the taxable portion must be additionally included under Schedule OS (Income from Other Sources).
- Practical Steps for Taxable Amount:
- Calculate the Taxable Portion: The taxable amount is generally the difference between the gross maturity proceeds received and the total premiums paid towards the policy.
- Report under "Other Income": Within Schedule OS, locate the section for "Other income" and accurately enter the calculated taxable portion of your LIC maturity proceeds. Ensure you classify it appropriately.
- TDS Credit: If Tax Deducted at Source (TDS) was applied to your maturity amount (which happens if the proceeds are taxable and exceed ₹1,00,000), ensure you claim this TDS credit in the "TDS" schedule of your ITR form based on Form 16A provided by the insurer.
Essential Documents for Reporting
To ensure accurate and compliant reporting of your LIC maturity amount, keep the following documents ready:
- Life Insurance Policy Document: This document provides key details such as the policy issuance date, sum assured, and premium payment structure, which are crucial for determining taxability under Section 10(10D).
- Maturity Claim Form / Discharge Voucher: This document, provided by the insurer (e.g., LIC), confirms the exact maturity amount received and the date of receipt.
- Form 16A (TDS Certificate): If your maturity proceeds were subject to TDS, the insurer would issue Form 16A. This certificate is vital for claiming the tax credit in your ITR.
By following these steps, you can ensure proper and compliant disclosure of your LIC maturity amount in your Income Tax Return.
