What Is The Full Form Of LIP In Income Tax?
LIP full form in income tax is Life Insurance Premium. This is the money you pay for life insurance, which might help you pay less in taxes depending on the rules in the Income Tax Act of India. LIP is important for saving on taxes, as it helps you get tax breaks under Section 80C and Section 10(10D) of the Act. Such rules prevent you from having to pay tax on the money received if the insurance ends or the person insured is not around anymore.
Registration and Applying:
To buy a life insurance policy, you pay a premium that could lower your taxes. It might be the purchase that brings your taxes down. Reflect those premiums on your tax returns in sections that speak about deductions or exemptions, and you could get those tax benefits.
Tax Rules and Updates:
The way LIP is treated for taxes has changed, especially after the latest budget changes. For policies commencing on or after 1st April 2023, the proceeds received on policy maturity shall not be eligible for tax exemption under Section 10(10D) except on the death of the insured person, wherein the annual premium exceeds ₹5 lakhs. The changes would zero in on expensive policies, update the tax rules to meet new financial goals and stop the misuse of tax breaks for policies with high premiums.
Following Rules and Recent Changes:
After the Sixteenth Amendment to the Income Tax Rules, starting in the tax year 2024-25, the Central Board of Direct Taxes (CBDT) has made clear rules for figuring out taxable income from life insurance policies where the premium is over ₹5 lakh.