Tax-saving is one of the key reasons why individuals in India consider life insurance. Life Insurance Corporation of India (LIC) offers a wide range of policies that not only provide life cover but also help policyholders save taxes under Section 80C and Section 10(10D) of the Income Tax Act. Choosing the best LIC policy for tax saving can help you optimize returns, secure your family’s future, and minimize your tax burden.
In this article, we’ll explore the top LIC policies for tax saving, who they are best suited for, tax benefits, comparison tables, and expert tips to make an informed decision.
📌 Why Choose LIC for Tax Saving?
LIC is the oldest and most trusted insurance provider in India. With sovereign backing, flexible plans, and high claim settlement ratios, LIC has become a go-to brand for investors looking to save on taxes and gain life coverage.
Key Reasons to Choose LIC for Tax Saving:
- ✅ Trusted government-backed institution
- ✅ Eligible for tax deductions under Section 80C
- ✅ Maturity proceeds are tax-free under Section 10(10D)
- ✅ Offers both term and investment-linked plans
- ✅ Bonus payouts on traditional plans
🧾 Understanding the Tax Benefits of LIC Policies
| Section | Tax Benefit |
|---|---|
| Section 80C | Premiums paid up to ₹1.5 lakh annually are tax-deductible |
| Section 10(10D) | Maturity proceeds including bonuses are tax-free (with some conditions) |
| Section 80D | Premiums paid for LIC’s health riders may be eligible for deduction (up to ₹25,000) |
Note: For Section 10(10D), the sum assured must be at least 10 times the annual premium.
🏆 Best LIC Policies for Tax Saving in 2025
Here’s a breakdown of the best LIC policies that offer tax-saving benefits:
1. LIC Jeevan Labh
A limited premium endowment plan ideal for saving tax and building wealth over time.
- Type: Endowment (with bonus)
- Premium Paying Term: 10, 15, or 16 years
- Policy Term: 16, 21, or 25 years
- Minimum Sum Assured: ₹2,00,000
- Tax Benefits: Under Section 80C & 10(10D)
Best for: Individuals who want a combination of savings, tax benefits, and life cover.
2. LIC New Jeevan Anand
Combines the benefits of an endowment plan with lifelong protection.
- Type: Endowment + Whole Life
- Policy Term: 15 to 35 years
- Minimum Sum Assured: ₹1,00,000
- Bonus: Yes (Reversionary and Final)
- Tax Benefits: Section 80C and Section 10(10D)
Best for: Those seeking lifelong protection and maturity benefits.
3. LIC Tech Term Plan
A pure term insurance policy with high coverage at low premiums.
- Type: Term (Online)
- Policy Term: 10 to 40 years
- Sum Assured: ₹50 lakh to ₹1 crore+
- Tax Benefits: Section 80C
Best for: Young professionals and those seeking high coverage with low premium.
4. LIC Jeevan Umang
A whole life policy offering regular income after the premium paying term.
- Type: Whole Life with Survival Benefits
- Premium Paying Term: 15, 20, 25, 30 years
- Payouts: Annual Survival Benefits after term ends until age 100
- Tax Benefits: Section 80C & 10(10D)
Best for: Long-term investors wanting income + tax benefits.
5. LIC Bima Jyoti
A guaranteed return plan offering loyalty additions and tax savings.
- Type: Non-linked, non-participating
- Policy Term: 15 to 20 years
- Guaranteed Additions: ₹50 per ₹1,000 sum assured annually
- Tax Benefits: 80C and 10(10D)
Best for: Conservative investors looking for assured returns with tax deductions.
📊 Comparison Table of Best LIC Tax Saving Policies
| Policy Name | Type | Tax Benefit | Maturity Benefit | Lifelong Cover | Ideal For |
|---|---|---|---|---|---|
| Jeevan Labh | Endowment | 80C, 10(10D) | Yes | No | Long-term savings + tax planning |
| Jeevan Anand | Endowment WL | 80C, 10(10D) | Yes | Yes | Lifelong security seekers |
| Tech Term | Term Plan | 80C | No | Yes | High sum assured with low cost |
| Jeevan Umang | Whole Life | 80C, 10(10D) | Yes | Yes | Retirement + income planning |
| Bima Jyoti | Guaranteed | 80C, 10(10D) | Yes | No | Risk-averse investors |
🎯 How to Choose the Right LIC Policy for Tax Saving
Selecting the right policy depends on your goals, age, income, and risk profile. Here’s how to decide:
✔️ For Pure Protection
Go for LIC Tech Term Plan. It’s affordable and offers high coverage. Ideal for working professionals with dependents.
✔️ For Long-Term Wealth Creation
Choose LIC Jeevan Labh or LIC New Jeevan Anand. These offer maturity benefits plus bonus.
✔️ For Regular Income Post Retirement
LIC Jeevan Umang is a perfect pick. It gives yearly payouts post maturity, with lifelong protection.
✔️ For Guaranteed Returns
Pick LIC Bima Jyoti if you want guaranteed additions and minimal risk.
📝 Real-life Example: How Tax Savings Work with LIC
Let’s understand with a simple example:
Rajesh, 35 years old, opts for LIC Jeevan Labh:
- Sum Assured: ₹10 lakh
- Premium Paying Term: 16 years
- Annual Premium: ₹70,000
- Total Premium Paid (16 years): ₹11,20,000
- Maturity Value (including bonus): ₹16–18 lakh (approx.)
- Tax Deduction: ₹70,000/year under Section 80C
He not only saves ~₹21,000/year in taxes (assuming 30% slab) but also gets life cover and wealth creation benefits.
🧾 Documents Required to Buy LIC Policy
To purchase any LIC policy for tax-saving, keep the following documents ready:
- PAN Card
- Aadhar Card
- Passport-size photograph
- Address Proof (Utility bill/Bank statement)
- Income Proof (for high-value policies)
- Age Proof (Birth certificate/10th marksheet)
🛡️ Additional Riders for Extra Tax Benefits
Some LIC policies allow optional riders that offer extra cover and tax deductions:
| Rider Name | Coverage | Eligible for Tax Benefit |
|---|---|---|
| Accidental Death Benefit | Extra payout on accidental death | Yes (80C) |
| Critical Illness Rider | Covers major illnesses like cancer | Yes (under 80D) |
| Term Rider | Additional sum assured on death | Yes |
✅ Pro Tips to Maximize Tax Saving with LIC
- Always ensure premium is less than 10% of sum assured to qualify for Section 10(10D).
- Use online premium calculators to plan policies based on tax slabs.
- Club LIC policies with ELSS or PPF to exhaust the ₹1.5 lakh 80C limit efficiently.
- Invest early in the financial year to avoid last-minute rush and better planning.
- Consider LIC e-services for online policy tracking, statements, and digital receipts (helpful for ITR).
🧮 How to Calculate LIC Tax Savings
Here’s a basic formula to estimate your tax saving:
Tax Saving = Annual Premium × Tax Bracket %
| Annual Premium | Tax Bracket | Estimated Saving |
|---|---|---|
| ₹50,000 | 5% | ₹2,500 |
| ₹1,00,000 | 20% | ₹20,000 |
| ₹1,50,000 | 30% | ₹45,000 |
🏁 Final Thoughts
Investing in a LIC policy is a smart way to combine financial protection, wealth accumulation, and tax savings. Whether you’re a salaried employee, entrepreneur, or planning for retirement, there’s a LIC policy tailored to meet your goals.
Choose wisely based on your needs:
- Want pure insurance? ➜ Go for LIC Tech Term
- Prefer returns + life cover? ➜ Pick LIC Jeevan Labh
- Need lifelong benefits? ➜ Choose LIC Jeevan Anand or Umang
🔍 FAQs: Best LIC Policy for Tax Saving
Q1. Can I claim tax benefit for all LIC policies?
Yes, most LIC policies are eligible under Section 80C. Ensure sum assured is 10x premium for 10(10D) benefit.
Q2. Is LIC maturity amount taxable?
No, if conditions under Section 10(10D) are met.
Q3. Can I buy LIC policy online?
Yes, LIC Tech Term and some other policies are available online via licindia.in.
Q4. Is LIC better than PPF for tax saving?
LIC offers life cover and returns, while PPF offers fixed returns. Best strategy is to diversify between both.