• Tax on ULIP pension plan for NRI

I am having 2 ULIP plan (both are pension fund) started in 2006. I became NRI since 2011-2012 onwards. While withdrawing I came to know they will deduct 31% TDS, hence I will have few questions
1. Is TDS will be applicable on total fund value or on profit?
2. Since I am NRI with no Indian income will I get TDS refund if I filled TAX return? 

Total fund value - 6.5 lac
Principle investment - 3.5 lac
Asked 6 years ago in Income Tax

Yes,

TDS will be deductible on Total fund value and you can get refund after filing your ROI.

Thanks

Sourabh Pahuja

Sourabh Pahuja
CA, Delhi
78 Answers
1 Consultation

5.0 on 5.0

Hi,

1) Yes, TDS on surrender of Life Insurance Policy (ULIP) is applicable on entire amount paid to you under the policy and not on profits only. Since you are an NRI now, TDS shall be deducted @30.90% u/s 195 for amounts paid being less than Rs. 50 Lakhs.

2) If you submit Form 10F and a Tax Residency Certificate (TRC) of your country of taxation, no TDS shall be deducted by the insurance company. Further, if you want to claim refund of TDS, in that case also, you will have to produce TRC and tax paid certificate on that income in the country of your tax residence. This issue is critical here, since DTAA with your country of tax residency has to be looked into and compared with Indian taxation system, since here tax is charged on the whole amount withdrawn which might not be the case in the country of your tax residency.

Regards,

CA. Sunny Thakral

Sunny Thakral
CA, Delhi
224 Answers
8 Consultations

5.0 on 5.0

1. TDS is applicable on total fund value i.e. 6.5 lac as the entire amount of 6.5 lac is your income.

2. Yes, you can claim refund of the excess TDS deducted by filing your Income Tax Return.

Harsh Kumar Garg
CA, Panipat
26 Answers

5.0 on 5.0

Dear Sir,

Please share the country of residence and accordingly DTAA provisions will apply may result in to non-deduction of TDS on ULIP.

Thanks

CA Vivek

Vivek Kumar Arora
CA, Delhi
4825 Answers
1029 Consultations

5.0 on 5.0

ULIP Plan Purchased in India or Outside India?

Priyank Kumar
CA, Agra
63 Answers

5.0 on 5.0

That doesn't affect anything

Harsh Kumar Garg
CA, Panipat
26 Answers

5.0 on 5.0

Presently, India does not specifically have a Comprehensive DTAA with the Kingdom of Bahrain. So, I believe you will have to pay Tax on entire ULIP surrender amount in India.

However, in case your assessable income in India is less than the minimum threshold, you may get refund of TDS deducted. Final Income Tax computation has to be seen and analysed.

Thanks & Regards,

CA. Sunny Thakral

Sunny Thakral
CA, Delhi
224 Answers
8 Consultations

5.0 on 5.0

Dear Sir,

There is no comprehensive agreement with the country of Bahrain. The only agreement is for exchange of information for taxes paid in each country which entitles you to claim the benefit of tax paid on ULIP in India if the ULIP income is taxable in Bahrain. I am not aware of the taxation laws of bahrain, so please check the law related to inclusion of global income in total income while filing return in bahrain.

Also, get the TDS deducted by indian income tax authorities and claim the same depending upon your total income. Obtain TRC for claim of TDS.

Regards

Vivek Kumar Arora
CA, Delhi
4825 Answers
1029 Consultations

5.0 on 5.0

The TDS will be on the profit earned i.e 3 lakhs. also assuming that this amount has been earned over a period of time from 2006 till date and it has not been offered to the tax department for tax, you can file return and pay taxes on this 3 lakhs and the TDS deducted will be adjusted accordingly.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Hi

TDS shall be deducted on the entire fund value.

Since there is no comprehensive DTAA with Bahrain which suggests tax adjustments, it is advisable to file Income tax return in India for this period as NRI, pay applicable taxes and claim the rest of refund of such TDS deducted.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

1) Yes. TDS will be applicable on appreciation in value (Fund value less premiums paid).

2) You can file return and claim refund.

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

Hi,

1. Yes, TDS will be deducted on full amount @30.90%

2. Since India does not have DTAA with baharain, the income from ulip will be taxable in India. You can file return of income in India and claim refund of balance TDS after adjusting with your tax liability.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

TDS @30.9% is applicable u/s 195 of Income tax Act. However, if the premium payable in any year doesnt exceed 20% of the sum assured under your policy, then as per section 10(10D), TDS isnt applicable. Sum assured does not include bonus, and is least of the amounts from all the years.

You may like to check the following links

https://economictimes.indiatimes.com/tdmc/your-money/what-you-must-know-about-taxability-of-life-insurance-policy-payouts/tomorrowmakersshow/49657095.cms

https://www.iciciprulife.com/services/nri-corner/nri-tax-benefits-on-life-insurance.html

https://cleartax.in/s/income-tax-for-nri

Hope it helps...!

In my opinion, you might need to file 10F & Tax residency certificate also as TDS might not be applicable in your case as per section 10(10D), if the premium amount is within limits.

Regards,

Siddharth

Siddharthh Jain
CA, Gurgaon
65 Answers
1 Consultation

5.0 on 5.0

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