• Premature surrender of pension policy

I had invested Rs 10.00 lac on 7-10-2009 in Bajaj Allianz New Unit Gain Easy Pension Plus SP Account having a tenure period of ten years and lock in period of three years. The policy was in cashed on [deleted] and 16,33,885/- was received. No deduction under 80C or any other section was claimed during 2009 in the year of investment. The AO is taxing the entire amount of Rs. 16,33,885/- instead of Rs. 6,33,885/-. In my opinion Rs. 10.00 lac is my already my taxed income and would this not lead to double taxation.
Kindly specify the Rule&Relevant Sections/Circulars of the I.T.Act on this issue.
Asked 13 days ago in Income Tax from Shimla, Himachal Pradesh

Hello Sir,

 

If you surrender your pension plan before maturity, the entire surrender value will be added to your annual income and taxed as per your tax slab. Also, you will have to pay back the tax exemptions you would have availed on the premiums paid until now.

 

This is as per Section 80 CCC of the Income Tax Act.

 

 

Karishma Chhajer
CA, Jodhpur
1522 Answers
11 Consultations

5.0 on 5.0

It's a litigative matter of whether the amount received from such policy should be taxed under income from capital gain or income from other sources.

As per my opinion it should be taxed as capital gain as one cannot tax the same income twice.

You must check what is AO contention behind taxing it as income from other sources and you must also take benefit of indexation as you have hold it for a period more than 3 years.

You must file an appeal against such order.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
2688 Answers
24 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

If you invested but didn’t take the tax benefit under Section 80CCC for any of the years(and subsequently surrendered), you may get some relief. You can deduct the premiums paid from the surrender proceeds to arrive at the taxable portion. However, it is subject to litigation.

 

 

Payal Chhajed
CA, Mumbai
3730 Answers
50 Consultations

5.0 on 5.0

There are no indexation benefits available on any insurance policy, including this one.

Payal Chhajed
CA, Mumbai
3730 Answers
50 Consultations

5.0 on 5.0

Hello,

 

As per the law, If an assessee chooses to surrender the pension plan, depending on the terms of the policy, the surrender value is added to the income of the assessee and offered to tax if he has availed of the tax benefits u/s. 80C while paying the premium.

However, in your case, since you have not availed tax benefits for the premium paid for the pension plan, then the excess of surrender value over the premium paid, should be taxed. This would be subject to litigation.

I hope that this answer satisfies your requirements. For further understanding, you can contact us directly at badlaniassociates at Gmail or take a phone consultation.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
1587 Answers
5 Consultations

5.0 on 5.0

Yes,  since you have not availed tax benefits for the premium paid for the pension plan, then the excess of surrender value over the premium paid, should be taxed. This would be subject to litigation.

I hope that this answer satisfies your requirements.

 

Regards,

CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
1587 Answers
5 Consultations

5.0 on 5.0

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