Taxation of LIC insurance

How is LIC taxed.
LIC plan 808 bought in 2012
sum assured: 250000rs
single premium: 50000rs
maturity benefit : 106000
TDS deducted: 5% of 56000rs.

the question I have is does this get taxed as capital gain with indexation or as income from other sources. this policy is not a endowment plan or a ULIP.

But as per few articles and few court cases it is stated that this will taxed as capital gain. but some local CA’s state that this should be part of income from other sources as they dont want to deal with any inquires coming in.

Hi @sagar.agrawal

It should be reported as Income from Other Sources.

In case you want expert assistance with your taxes, you can book a MEET for filing your return or Ask an Expert.

Can I please understand as to why it isn’t a capital gain because askit also says. Please check link and screenshot attached


Can you please help here?

Hello @sagar.agrawal,

In the Budget, 2023 it is clarified that maturity proceeds of LIC will be taxable under Income from Other Sources.

Hope this helps!

Hi @CA_Niyati_Mistry CA_Niyati_Mistry
I read the finance bill 2023.
page 44. amendment to section 56, page 168
and it mentions of it but effective from 1st april 2024. can you confirm on this. because as per this year I think it can still be put in as capital gain

Hello @sagar.agrawal,

I went through the details of circular released by ITD when the amendment was made in 2003, the case stated by you will be taxable under the head Income from other sources. At your discretion you can disclose it as capital gains or income from other sources.

Hope this clarifies!

I had put up my query yesterday on taxability of LIC policies with a specific example. I will be grateful if you answer my query.

Two single premium policies taken in Feb 2014 has matured in Feb 2023.
Policy 1 :
Sum assured - 50,000
Premium paid - 38,425
Int Bonus : 2000
Net amount received - 40,425

Policy 2:
Sum assured - 2,30,000
Premium paid - 1,62,615
Int Bonus - 9,200
Amount payable by LIC - 1,71,815
Amount received - 1,67,055

Under section 194 DA, TDS is 4,760. I could see in AIS that total amount paid by LIC is reflecting as 78,200

How do i declare this income from other source while filing ITR1?

78,200 is the income from other source and the rest can i enter under section 10(10D)? Please explain how to file

Based on the last comment, should i declare only 6,440 ( 2k from Policy 1 and 4,440 from Policy 2) as income from other source? And the rest 2,01,040 would be exempt income?

Hi All, could one of you help with my query.

Thanks in advance


Hi @V18

You can show the net proceeds (maturity amount - premium paid) received under income from other sources and claim the TDS as tax credits.

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Thank you for responding.

Could you confirm if i can declare 6,440 ( 2k from Policy 1 and 4,440 from Policy 2) as income from other source? Remaining 2,01,040 would be exempt income under section 10 (10d)?

Hi @V18

You cannot claim the exemption u/s 10(10D) as the premium paid on the life insurance policy exceeds 10% of the sum assured for policies issued after 1 April 2012.

Hence, the maturity proceeds are taxable under IFOS at the applicable slab rate.

Thanks @Shrutika_Shah

Please confirm if my below understanding is right

(1) I can declare the net maturity proceeds (amount received - premium paid) in the income from other source category.

(2) I need not disclose the remaining amount received from maturity as an exempt income.

(3) I am not sure why income from LIC is reflecting as 78,200 in AIS. Should i be declaring 78,200 as IFOS?

Hi @V18

Here are answers to your various questions.

  1. Yes, you need to disclose the net maturity proceeds (amount received - premium paid) under IFOS in your return.

  2. Since the policies are issued after 1 April 2012 premium and the premium paid is more than 10% of the sum insured, you will not be able to claim an exemption. So, there is no requirement to disclose any exempt income.

  3. You can disclose the actual amount received from LIC. If you think there is a mismatch in the AIS, you can submit feedback on the AIS portal.

Hope this helps.

Hi @Shrutika_Shah,

Regarding your response to my third query,

a) I need to declare only the net maturity proceeds while filing ITR1 right?

b) Should i be disclosing the actual amount received (2,07,480) anywhere while filing?

Hi @V18

  1. If your total income from salary/pension, other sources, or one house property is up to ₹50,00,000, you should file ITR 1. Here’s a read about Which ITR Form Number to Fill? - Learn by Quicko.

  2. You should disclose the actual taxable net maturity proceeds (amount received - premium paid) under IFOS in your return.

For expert assistance with your taxes, you can book a MEET and connect to a tax expert on an online video conferencing call.

Thank you so much @Shrutika_Shah for your invaluable assistance and guidance in addressing my queries.


Glad that I was able to help!