Premium paid at the time of ULIP is divided into two parts- one premium for insurance and other for units. If the premuim for insurance was 10% or more of the sum assured then you need to pay tax on the whole amount received.
Is the amount received after surrender of the ULIP policy taxable? The policy was started 10 years back and premium paid was for 4 years. The lock in period of the policy was 3 years. The ULIP plan is Future Secure from Bajaj Allianz. I want to surrender the policy.
Premium paid at the time of ULIP is divided into two parts- one premium for insurance and other for units. If the premuim for insurance was 10% or more of the sum assured then you need to pay tax on the whole amount received.
As per sec 10(10d), if the premium paid in any of the years is more than 10% of the sum assured then the entire maturity proceeds will become taxable.
Hope that clarifies.
Regards,
Nikhil.
HI,
ULIPS must be kept in force for 5 years to claim deduction- The premiums must be paid regularly and the ULIP must be continued to avail tax benefits. In case you discontinue your ULIP before 5 years, you will not be allowed any tax benefits. Any deduction allowed in the previous years shall get added back to your income in the year in which ULIP is closed.
Tax benefit on investment on maturity- If the premium paid on the policy is less than 10% of the sum assured during the term of the policy the amount received on maturity are exempt from tax. (For policies purchased before 1st April 2012, the premium must be less than 20% of the sum assured). This exemption is allowed under section 10(10D) of the Income Tax Act. You must report this as exempt income in your income tax return.
However, if the premium amounts are more than the % prescribed above, then the entire money received at maturity has to be added under the Income from other sources in the income tax return.
Thanks
Damini