LIC and income tax in 2026–27: Section 80C, now Section 123

Check your tax regime first

The life insurance and health insurance deductions apply only if you choose the old tax regime. Under the new regime, which applies unless you opt out, neither is allowed. Under the new regime, income up to ₹12 lakh (₹12.75 lakh for salaried taxpayers, after the standard deduction) carries no tax because of the rebate.

So for many salaried people, a policy bought “to save tax” saves nothing. Ask your CA which regime suits you before buying anything for tax reasons.

How much of your premium counts (old regime)

• The overall limit is ₹1.5 lakh a year, shared with PPF, EPF, ELSS, children’s tuition fees and home-loan principal.
• Premiums count for policies on your own life, your spouse’s or your children’s. For a Hindu undivided family, on any member’s life.
• For policies issued on or after 1 April 2012, only premium up to 10% of the sum assured counts (20% for older policies; 15% from 1 April 2013 where the insured has a disability or a specified illness).
• Health insurance premiums are a separate deduction (Section 126): up to ₹25,000, or ₹50,000 for senior citizens.
• If you end a policy within two years — by surrender or by stopping premiums without revival — the deductions already claimed are reversed.

Are the payouts tax-free?

This applies under both regimes.

• Death benefit paid to the nominee: tax-free, whatever the premium (keyman policies taken by an employer are the exception).
• Maturity and survival benefits: tax-free only if the yearly premium stays within the same 10% (or 20% for older policies) of sum assured.
• Non-ULIP savings policies issued on or after 1 April 2023: maturity is taxable if your total yearly premium across such policies exceeds ₹5 lakh.
• ULIPs issued on or after 1 February 2021: the same, with a ₹2.5 lakh limit.

Proof for your employer: the premium paid certificate

Employers ask for proof of LIC premiums in January and February to apply the deduction in your salary TDS. LIC’s customer portal gives this as a premium paid certificate.

• Individual policy certificate: premiums paid under one policy during the financial year.
• Consolidated certificate: premiums under all your registered own-life policies. It leaves out policies on your spouse and children, so download those separately.
• Both cover the current and the previous two financial years.
• For policies paid by monthly NACH auto-debit, no receipts are sent; the servicing branch issues a premium paid certificate twice a year, and the portal has it too.
• Not registered on the portal? Your servicing branch can issue the certificate, or I can help you register.

The 31 March deadline — and why not to rush

For the deduction, the premium must be paid within the tax year: by 31 March 2027 for tax year 2026–27.

Buying in the last week of March is how families end up with a policy that fits the deadline but not their needs. Start with the protection your family needs; the tax benefit, if you are on the old regime, comes with it. I run that conversation from January onwards, free.

Frequently asked questions