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Lic Jeevan Sugam 5.59% after 10 years

Lic Jeevan Sugam 5.59% after 10 years

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Published by kirang gandhi
Lic Jeevan Sugam 5.59% after 10 years
Lic Jeevan Sugam 5.59% after 10 years

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Categories:Types, Research
Published by: kirang gandhi on Mar 19, 2013
Copyright:Attribution Non-commercial


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LIC’s Jeevan Sugam advertisement claims to give 80C tax benefit at entry, but curiously it is silentabout the 10(10D) tax-free corpus at exit. At a time when insurers make bold claims about taxbenefits, LIC is understating the tax benefit which can create suspicion in the minds of consumersLIC (Life Insurance Corporation of India) has launched a traditional single premium product, JeevanSugam. The death benefit is 10 times the single premium paid and hence it should qualify forSections 80C and 10(10D) tax benefits at entry and exit, respectively. Tax savings is an importantselling point for insurance products and insurers like to highlight it in advertisements even to theextent of mis-selling.Strangely, the Jeevan Sugam advertisement only highlights Section 80C tax benefit, but remainssilent 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 perprevailing 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 annualpremiums (the earlier limit was five times) for insurance policies to enjoy the tax benefits oncontributions under Section 80C and on maturity under Section 10(10D), the LIC Jeevan Vriddhiadvertisement stated “Full tax benefits available up to 31st March 2012” as its death benefit was fivetimes the premium.So, keeping silent on tax-free corpus on maturity for Jeevan Sugam is intriguing as LIC could havehandled it like Jeevan Vriddhi in case tax laws were to be changed in the Finance Bill, 2013. As thereis no change to the regulation pertaining tax benefit in the Union Budget 2013 (except for those withdisabilities) there is no reason for LIC to keep silent on the 10(10D) benefit. It will only make theconsumer suspicious about whether they will indeed get tax-free corpus on maturity.We written to LIC to find out the reasoning, but there was no response till writing of this article. Onecall to an LIC official left us even more curious. After a short laugh, the person stated that they arenot 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. Wedon’t want to pitch the product for tax savings purpose as it should be purchased for insuranceneeds. 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 savingspurposes? 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 insuranceproducts 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 hasstopping putting 10(10D) benefit for last few products, but we have not been told the reasons by thecorporate office.” Another LIC agent feels that it is due to some sort of clarification from a taxconsulting company that LIC has dropped 10(10D) in the advertisement. While this is merespeculation, the fact is that LIC being a de facto government organisation, can indeed seekclarification from the finance ministry and take a firm stand on tax benefits of the product.

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