LIC’s Jeevan Sugam: Why is LIC suppressing the tax benefit feature under Section 10(10D)

LIC’s Jeevan Sugam advertisement claims to give 80C tax benefit at entry, but curiously it is silent about the 10(10D) tax-free corpus at exit. At a time when insurers make bold claims about tax benefits, LIC is understating the tax benefit which can create suspicion in the minds of consumers

LIC (Life Insurance Corporation of India) has launched a traditional single premium product, Jeevan Sugam. The death benefit is 10 times the single premium paid and hence it should qualify for Sections 80C and 10(10D) tax benefits at entry and exit, respectively. Tax savings is an important selling point for insurance products and insurers like to highlight it in advertisements even to the extent of mis-selling.


Strangely, the Jeevan Sugam advertisement only highlights Section 80C tax benefit, but remains silent about 10(10D) tax-free corpus on maturity. What could be the reason?


Till March 2012, LIC was mentioning “Income Tax benefits under Section 80C and 10(10D) as per prevailing tax laws” in the advertisement. Case in point is Jeevan Vriddhi which mentioned about it. When the Finance Bill, 2012, made it mandatory that the sum assured should be 10 times the annual premiums (the earlier limit was five times) for insurance policies to enjoy the tax benefits on contributions under Section 80C and on maturity under Section 10(10D), the LIC Jeevan Vriddhi advertisement stated “Full tax benefits available up to 31st March 2012” as its death benefit was five times the premium.


So, keeping silent on tax-free corpus on maturity for Jeevan Sugam is intriguing as LIC could have handled it like Jeevan Vriddhi in case tax laws were to be changed in the Finance Bill, 2013. As there is no change to the regulation pertaining tax benefit in the Union Budget 2013 (except for those with disabilities) there is no reason for LIC to keep silent on the 10(10D) benefit. It will only make the consumer suspicious about whether they will indeed get tax-free corpus on maturity.

Moneylife has written to LIC to find out the reasoning, but there was no response till writing of this article. One call to an LIC official left us even more curious. After a short laugh, the person stated that they are not ready to part with the logic behind the move. On insistence, here is the clarification he gave:  “10(10D) should be available, but LIC has stopped mentioning about it for the last few products. We don’t want to pitch the product for tax savings purpose as it should be purchased for insurance needs. Since it is a tax saving season, we are highlighting Sec 80C benefit.”

Why even highlight 80C if the product is to be purchased for insurance needs and not tax savings purposes? Moreover, tax savings is guaranteed by the regulations and hence why shy away from it? According to one LIC agent, “The end result is that the very reason why people buy insurance products will lead to confusion about tax benefits on exit.”


Even the LIC’s development officers seem to be in the dark. According to one of them, “LIC has stopping putting 10(10D) benefit for last few products, but we have not been told the reasons by the corporate office.” Another LIC agent feels that it is due to some sort of clarification from a tax consulting company that LIC has dropped 10(10D) in the advertisement. While this is mere speculation, the fact is that LIC being a de facto government organisation, can indeed seek clarification from the finance ministry and take a firm stand on tax benefits of the product.


There could be three possible speculations why LIC may not be advertising about 10(10D) tax benefits. Let’s take example of person aged 30 years with premium of Rs33759 + 3.09% service tax. The death benefit will be Rs3,37,590, but maturity sum assured is only Rs60,000.


  • If you are not healthy, your premium will be loaded and you may not even meet the requirement of death benefit of 10 times the premium; 10(10D) will not be applicable. E.g. class one extra for age 30 years in above example will be Rs846. Total premium payable = Rs33,759 + 846 + service tax.
  • LIC Jeevan Sugam does have death benefit as 10 times of the premium, but it is excluding the service tax. Could this be an issue as the total premium with service tax will be more than 10% of the death benefit? It is unlikely. E.g. Premium with service tax = Rs33,759 + Rs1,043.15 = Rs34,802.15.
  • The maturity sum assured in the product is different than death sum assured. While the death sum assured is 10 times the premium, the maturity sum assured is low. The wordings in the rules specify about premium up to 10% of the actual capital sum assured. Some interpret actual capital sum assured as maturity sum assured, which makes Jeevan Sugam ineligible for tax benefits. More likely, death benefit will be the capital sum assured and stamp duty of the policy is payable on it and not maturity sum assured. It may be a non-issue, but see comment section below for another interpretation.


When the government issues tax-free bonds, it is clear that the interest paid on the bonds is tax-free. As a buyer you are assured that tax-free bonds indeed will never ask for taxation on the interest. The same clarity is there for PPF and EPF. Will insurance product buyers not want such comfort level? They deserve it and the insurer’s silence about it is tantamount to disservice. Nobody likes to be opaque about tax benefits of the product, and especially they don’t want nasty surprises of tax payment on the corpus at product maturity.


If any reader has more information about the reasoning behind LIC’s Jeevan Sugam being silent about 10(10D) benefit, please write to [email protected] We will keep it confidential.

Moneylife wrote about SBI Life’s Smart Income Protect advertisement claiming tax-free payout with fine print about consulting tax advisor for details. What is not clarified is that policy term of five and 10 years does not qualify for 10(10D) tax benefit, only policy term of 15 years will.


Read - SBI Life Smart Income Protect: Regrets guaranteed, year after year


Insurance companies tend to overpromise on tax benefits and under deliver, but here LIC seems to under promise and hopefully will over deliver.


Read the latest Moneylife cover story (21 March 2013) “Pension & Life Policies: Tax-traps?” for some secrets on pension and life insurance taxation that insurers will not tell you about. The magazine is available on the stands from 8th March 2013.




2 years ago



4 years ago

Interesting information from one Moneylife reader -

Definition of actual capital sum assured under Section 80C states :

For the purposes of this sub-section, "actual capital sum assured" in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—

(i) the value of any premium agreed to be returned; or

(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

The happening of the insured event can be Maturity also other then Death and Minimum Assured amount is paid on Maturity.

So one will get tax benefit on premium upto 10% of Maturity Sum assured under sec 80C and benefits of 10(10D) will not be available.

As interpretation differ from person to person, please get it clarified from Tax experts or CBDT for the benefit of investing public.



In Reply to raj 4 years ago

Different tax experts will have different interpretations of what has been said above, will they be around 10 years later when people receive their maturity? If the IT officers start interpreting their own way then what?
There seems to be a lot of confusion over this 80c and 10(10D) Lets hope Raj and Moneylife can organize a seminar on this topic specifically, with a talk by 1-2 EXPERTS who can clarify these doubts.


4 years ago

maturity proceeds of insurance policy is tax free u/s 10(10)D may get withdrawn , remember govt planning for EET ,(Exempt at entry , exempt while enjoyment,TAX at exit) expct this soon .



In Reply to sridharan 4 years ago

What is being talked here is present regulations and not whether it may be withdrawn later.
If today a product is 10(10D) compliant it will remain so irrespective of any change which may come in future.


4 years ago

The service tax component goes to the Govt Of India, That should not be taken into consideration.
The premium receipt from LIC Clearly states Premium and service tax Separately, so if one needs to claim 80C benefit then technically it is on the premium paid only and excluding the service tax component.
As to why LIC is silent on 10(10D) it is actually intriguing as the product for a normal person fulfills all the criteria for being 80C AND 10(10D) compliant.

Madhusudan Thakkar

4 years ago

It is the duty of IRDA to ensure that plans they clear should fulfil requirements with regard to Taxation...On the one hand IRDA is concerned about so-called mis-selling & on the other hand it is giving clearance to such Toxic plans.....All said & done IRDA will not do anything it is a toothless tiger...Remote control is with Finance Ministry.....So nothing will happen in this case ....LIC will make a "Kill" in the current month especially for Tax- Saving purpose.


Rajesh Kumar Gupta

In Reply to Madhusudan Thakkar 2 years ago

prior to 1992 the same restriction of life insurance premia upto 10% of sum assured was applicable. the sum assured had the same definition as it is today i.e. excluding any premia returned during the term of policy
or bonus additions. section 10(10)D was not there at that time. can it help in any way to come out of deadlock.

National free roaming likely before October: Telecom minister

In December, TRAI floated a pre-consultation paper seeking inputs from stakeholders on tariff for national roaming services. The government is expected to take a call on national free roaming after the regulator submits its recommendations

Telecom minister Kapil Sibal on Thursday said the government will try to launch national free roaming for telecom customers before October this year.


“TRAI (Telecom Regulatory Authority of India) has floated a consultation paper on it (national free roaming). So when TRAI’s recommendations come and after that, we will try to start free roaming before October,” Sibal said on the sidelines of the launch of National Internet Registry (NIR).


In December, TRAI floated a pre-consultation paper seeking inputs from stakeholders on tariff for national roaming services. It sought views of stakeholders on aspects of national roaming services like the cost components of call rates to be considered, the manner of cost recovery in case incoming calls are to be made free, the tariff for video calls and SMS while roaming, need for permitting special tariff vouchers for roaming customers.


At present, telecom operators have to pay various charges like termination charges, interconnect charges, for completing call of their customers on to other networks which get added to the final cost of the call for the customer.


Sibal also launched the National Internet Registry (NIR), which will reduce the cost of processing IP addresses. NIR is entrusted with the task of coordinating IP address allocation with other Internet resource management function at national level in the country.


The Department of Electronics and Information Technology (DEITY) had earlier endorsed the operations of NIR to National Internet Exchange of India (NIXI). NIXI was recognised by the Asia Pacific Network Information Centre (APNIC) in March last year. NIR has been named as Indian Registry for Internet Names and Numbers (IRINN).


IRINN, a division under NIXI, provides allocation and registration services of Internet Protocol Addresses (IPv4 and IPv6) and autonomous systems numbers to its affiliates to the Indian Internet communities.


M&M workers call off stir at Nashik facility

Around 3,000 workers resorted to “tools down” protest on Tuesday demanding revocation of suspension of two office-bearers of the employees union

The “tools down” strike at automobile maker Mahindra & Mahindra’s (M&M) plant in Nashik was called off on Thursday after the management agreed to reinstate two office-bearers of the employees union and finalize on wage hike agreement by 15th April, authorities said.


Around 3,000 workers resorted to “tools down” protest on Tuesday demanding revocation of suspension of M&M Employees Union general secretary Praveen Shinde and vice-president Amol Sonawane.


“The workers have called off the strike and will resume the duty in the evening shift following a meeting between representatives of the management and the union held at the deputy labour commissioner’s office”, deputy labour commissioner RS Jadhav and M&M general manager (HR) Anil Godbole told reporters after emerging from the meeting that lasted for more than five hours.


Mahindra produces Scorpio, Bolero and Xylo models of SUVs and Verito (sedan) at its Nashik-based manufacturing facility.


“The (Mahindra) management has agreed to revoke suspension of union office-bearers Shinde and Sonawane and consider renewal of the wage hike agreement by 15th April”, said union president Shirish Bhavsar.


Shinde and Sonawane were placed under suspension by the management allegedly for exhorting workers to stop work till their demands are met. The duo who were on hunger strike since their suspension called it off on Thursday.


“Our union has also decided against going on strike from 11th March ”, Sonawane said. According to a statement by the company earlier in the day, the stir by employees, started on 5th March, resulted in a production loss of around 500 vehicles till date. The production loss is unlikely to have any immediate impact on sales as the company already has three weeks’ stock in the pipeline, the statement said.


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