Is LIC insurance policy halal or haram

I have already clarified in an earlier post that only term insurance can be considered in the subject of halal/ haram:
Is Life Insurance Halal in India

Building on that we can analyze the policies of India's favourite Insurance destination.
Many Muslims may have been subscribed to these policies both for tax benefits as well as the promising returns. Those that have been blessed by knowledge may have curiosity to research the term and may have invested in Unit Linked plans (ULIP).
But biggest problem of all Insurance based Investments is transparency. It is not at all easy to find where exactly your money is invested. Mutual Funds are so much better since you can see every percentage of where exactly it is invested.
Here we analyze the investment pattern which will conclude what is permissible and what is not. Although this article takes LIC for reference, but it is applicable to all insurance companies since they all have similar plans.


LIC Term Insurance Plans:

Plain simple explanation: Except Term Insurance (Assurance), rest all are not permissible.
The Term policies in LIC are named:

1. LIC's Anmol Jeevan 
2. LIC’s Amulya Jeevan
3. LIC eTerm policy

All are pure insurance and not investment that will give you return on maturity. Since these are not "money-back" plans there aren't any investments made.
These are the only ones fine; rest all are non-permissible. Let us explore each category and check the reasons for the same.


Endowment Plans:

Whether it is single premium or any other Xxxxx Jeevan plan it doesn't matter. The fact that you are getting money back points to some form of investment. So we only have to examine where the returns from investment are coming.
All plans of LIC invest into Government debt unless explicitly specified that the plan investments majorly in equity.
So government debt means loan to government and the profit is gets is the INTEREST it receives from government for those loans.
So all these plans are just Interest based investments and obviously not permissible.


Money Back Plans and Child Plans:
Exactly same investment pattern as Endowment plans. Hence Interest based investments and obviously not permissible.


Pension Plans:
Similar problem either Interest based (Jeevan Nidhi) or Annuity based (Jeevan Akshay).
Annuity is nothing but interest earnings.


ULIP (Unit Linked Insurance Plan):
This is one plan that is sold to many Muslims who might raise the interest objection to an insurance agent. Many Muslims are told that investment plan can be chosen and you can invest 100% into stock market which is halal.
However, things are not so simple.
And also here comes the comparison with Mutual Funds. In case of Mutual Funds I can easily search and get the complete investment breakup of every single rupee. I know how much is invested in equity in which sectors and in which exact company's stock. This helps in finding out how much of the MF investment is in haram stocks.
All this is very difficult in ULIP. You cannot easily get these details at all. And in case you can get the details, please check the stock market investments. Am sure you will find major part of investment in Financial Sectors especially bank stocks.
Also not 100% is allowed in stocks. Most plans will restrict it to 70-80% in stocks and rest will be in Government Securities or Money Market Instruments (both interest based)
And this is the reason why ULIP cannot be counted as halal.


In the end I would suggest to completely read the policy document carefully and research on the internet. Do not fall into the Insurance Agents trap or the Investment trap since it is clear that other than basic life insurance rest all is purely interest based income.

Halal Tax Saving Investments in India

This article only discusses tax saving through investments; it doesn't discuss about other tax saving options. There are ways to reduce taxes through deductions and its discussed another article:
Halal Tax Saving

Let me get straight to the point, I feel THERE IS NO HALAL TAX SAVING INVESTMENT IN INDIA.
You can continue reading further to know the reasons for the same.
I am not even going into the stupid arguments that interest is allowed, small percentages are fine, interest in not usury, riba stands only for usury and not interest. Allah has given us brains to think and the Quran/ Sunna as a guide; every person is capable of investigating and finding out what is allowed and what is not.


Interest Based Investments

All these schemes are Interest based ones and hence obviously haram.

1. PPF  (Public Provident Fund )
2. NSC/ NSS (National Saving Scheme/ Certificate)
3. KVP (Kisan Vikas Patra)
4. SCSS (Senior Citizens Saving Scheme)
5. FD (Fixed Deposits) 
6. TD (Post Office Time Deposit)
7. Infrastructure Bonds

Insurance

Pure Life Assurance and Medical Insurance (for self and parents) maybe fine and is a good tax deduction; but it is not literally an investment. You do not get any returns directly.
Most of the insurance schemes in India are investment based and none are halal. The following popular ones have Interest components:

1. Guaranteed 
2. Highest NAV
3. Endowment
4. Balanced
5. Any of the Jeevan ****** from LIC

More details here:
Is Life Insurance Halal in India Is LIC insurance policy halal or haram

ULIP (Unit Linked Insurance Plan) These are somewhat similar to Mutual Funds and they can have Debt as well as Equity components. The Debt ones are obviously not allowed as that falls under Interest. The Equity one is also not allowed because of the following reason:

• You have no idea about which Stocks the insurance company invests the ULIP funds as they do not reveal where they have invested.
• Rest of the points are same as ELSS below.

I have discussed some "Shariah compliant Ulip" here: Shariah compliant Ulip/ Pension/ Insurance Fund

Pension Schemes

Pension Schemes can take various forms and are usually from Government, Insurance Companies and Mutual Funds. However, all these are heavily into Interest based investing and hence not allowed.

1. NPS (New Pension Scheme)
2. ULPP (Unit Linked Pension Plan)
3. Pension Fund from Insurances
4. Pension Fund from Mutual Funds

ELSS (Equity Linked Savings Scheme)

Probably the most popular among Muslims as a non-interest based investment. Unfortunately this is not halal either. They do the following haram investments

• Although they are equity based, some portion (about 10-20%) will be invested in Debt instruments.
• Usually they invest a significant portion in shares of Financial Instituitions like Banks, NBFC, etc.
• There is nothing stopping them from investing in completely haram sectors like Alcohol, Sugar, Media & Entertainment, Tobacco.
• For capital intensive sectors like Infrastructure, Power, Machinery, Oil & Gas each company has to be evaluated carefully as many are heavily into debt all the time (i.e. paying huge amount of interests)
• Cash rich companies like IT, PSU's have huge amounts of idle cash often invested in Banks/ Bonds and other short-term investments. This pays them a good amount of interest income.

Even if you ignore the last 2 points; just go through the Investment Portfolio of any ELSS Mutual Fund and you will see that nearly 30%-50% comes under haram industries.


Home Loans

If you have taken a Home loan from a Bank/ NBFC, you are surely paying interest and by Shariaah both the interest payer and receiver are equally sinful. The only way this can be made halal for tax purposes is that you take a loan from your father/ mother or some close relative with 0% interest and just show to the government that you are paying them interest.


Compulsory Investments

The following are Tax Saving Investments for salaried employees and are usually compulsory; so you do end up forcefully investing in them.

1. EPF (Employee Provident Fund)
2. Superannuation.

Since they are forced over you, you can't do anything about it. However, whenever you resign you can withdraw the same.

Conclusion

So what do you do? It's simple you pay the Tax. What else can you do? It might be haram to pay such high levels of tax, since there is no basis in religion for such high taxes and much of the money doesn't get used up in the right way. 

However, to prevent one haram that is forced upon you, it is not right to willfully commit another haram by investing in non-Shariaah way. Allah knows best.
And don't forget to read other ways of tax saving: Halal Tax Saving