{"id":8554,"date":"2020-01-29T09:35:14","date_gmt":"2020-01-29T04:05:14","guid":{"rendered":"http:\/\/www.apnaplan.com\/?p=8554"},"modified":"2020-01-29T12:15:14","modified_gmt":"2020-01-29T06:45:14","slug":"ulip-life-insurance-tax-surrender-maturity","status":"publish","type":"post","link":"https:\/\/www.apnaplan.com\/ulip-life-insurance-tax-surrender-maturity\/","title":{"rendered":"How are ULIP &#038; Life Insurance Policies Taxed on Surrender &#038; Maturity?"},"content":{"rendered":"<p style=\"text-align: justify;\">Insurance &amp; Pension Products have been most miss-sold financial product in last few years. Most buyers are lured into it in the name of good returns, added life insurance along with tax savings. After a few months\/years the policy holder realizes that he has been sold a dud product and the only way to get rid of it is to surrender or make it paid-up policy. In this post we tell you <strong>what would be tax implication on surrendering a life insurance policy and pension plans<\/strong>.<\/p>\n<h2 style=\"text-align: justify;\">Tax on surrender of Life Insurance Policy or ULIP:<\/h2>\n<p style=\"text-align: justify;\">There can be<strong> two tax implications on surrendering of life insurance policy or ULIPs<\/strong><\/p>\n<ol>\n<li>The surrender value may be taxable &amp;<\/li>\n<li>The tax benefit on premiums paid in earlier years under section 80C can be reversed<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">We explain the conditions for above points so that you can decide accordingly and lessen your tax burden.<\/p>\n<blockquote>\n<p><strong>Also Read:\u00a0<\/strong>\u00a0<a href=\"http:\/\/www.apnaplan.com\/buy-life-insurance-tips\/\">9 Tips to Buy the Right Life Insurance<\/a><\/p>\n<\/blockquote>\n<p style=\"text-align: justify;\"><strong>The surrender receipts are tax free if following conditions are fulfilled:<\/strong><\/p>\n<ol>\n<li>Policies issued before March 31, 2003<\/li>\n<li>Policies issued between April 1, 2003 and March 31, 2012 and the sum assured is more than 5 times of annual premium paid<\/li>\n<li>Policies issued after April 1, 2012 and the sum assured is more than 10 times of annual premium paid<\/li>\n<\/ol>\n<p style=\"text-align: justify;\"><strong>As a special case for life insurance of the disabled and those suffering from ailments,<\/strong> the annual premium can be less than 15% of the sum assured \u2013 i.e. \u2013 Sum assured should be greater than 6.67 times the annual premium. <a href=\"http:\/\/www.apnaplan.com\/16-personal-finance-changes-in-budget-2013\/\">This change was made in Budget 2013<\/a>.<\/p>\n<p style=\"text-align: justify;\"><strong>Additionally the tax benefit on premiums paid in earlier years under section 80C can be reversed if<\/strong><\/p>\n<ul>\n<li>In case <strong>single premium policy<\/strong> has not been held for at least two years<\/li>\n<li>In case of <strong>traditional policies like endowment &amp; money back<\/strong> haven\u2019t paid at least 2 years premium or<\/li>\n<li><span style=\"text-align: justify;\">atleast <\/span><strong style=\"text-align: justify;\">5 years premium in case of ULIPs<\/strong><span style=\"text-align: justify;\"> (unit linked insurance plan) is not paid<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\">If policy is surrendered before the lock-in period, the surrender value would be paid after the lock-in period after deduction of applicable surrender charges.<\/p>\n<blockquote>\n<p><strong>Also Read:<\/strong>\u00a0<a href=\"http:\/\/www.apnaplan.com\/pmvvy-pradhan-mantri-vaya-vandana-yojana-review\/\">LIC Varishtha Pension Bima Yojana Review<\/a><\/p>\n<\/blockquote>\n<h2 style=\"text-align: justify;\">Tax on Maturity of Life Insurance Policy or ULIP<\/h2>\n<p style=\"text-align: justify;\"><strong>The maturity value of Life Insurance Policy or ULIP is tax free if following conditions are fulfilled:<\/strong><\/p>\n<ol>\n<li>Policies issued before March 31, 2003<\/li>\n<li>Policies issued between April 1, 2003 and March 31, 2012 and the sum assured is more than 5 times of annual premium paid<\/li>\n<li>Policies issued after April 1, 2012 and the sum assured is more than 10 times of annual premium paid<\/li>\n<\/ol>\n<p style=\"text-align: justify;\"><strong>As a special case for life insurance of the disabled and those suffering from ailments, <\/strong>the annual premium can be less than 15% of the sum assured \u2013 i.e. \u2013 Sum assured should be greater than 6.67 times the annual premium. <a href=\"http:\/\/www.apnaplan.com\/16-personal-finance-changes-in-budget-2013\/\">This change was made in Budget 2013<\/a>.<\/p>\n<h2 style=\"text-align: justify;\">Tax on Proceeds of Life Insurance Policy or ULIP on Death<\/h2>\n<p style=\"text-align: justify;\">The <strong>proceeds received from life insurance policy or ULIP on death of policyholder to their nominee is tax free under Section 10(10D).<\/strong><\/p>\n<blockquote>\n<p><strong>Also Read:\u00a0<\/strong><a href=\"http:\/\/www.apnaplan.com\/how-much-time-for-life-insurance-companies-to-settle-death-claims\/\">How much Time for Life Insurance Companies to Settle Death Claims?<\/a><\/p>\n<\/blockquote>\n<figure id=\"attachment_8556\" aria-describedby=\"caption-attachment-8556\" style=\"width: 1021px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-8556\" src=\"https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity.png\" alt=\"How are Life Insurance and Pension Policies Taxed on Surrender and Maturity?\" width=\"1021\" height=\"551\" title=\"\" srcset=\"https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity.png 1021w, https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity-300x162.png 300w, https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity-768x414.png 768w\" sizes=\"(max-width: 1021px) 100vw, 1021px\" \/><figcaption id=\"caption-attachment-8556\" class=\"wp-caption-text\"><strong>How are Life Insurance and Pension Policies Taxed on Surrender and Maturity?<\/strong><\/figcaption><\/figure>\n<h2 style=\"text-align: justify;\">Tax on Pension Plans\/ ULPP:<\/h2>\n<p style=\"text-align: justify;\">Pension Plans and ULPP (Unit Linked Pension Plan) have adverse taxation at the time of surrender and maturity. The details are shown below:<\/p>\n<h3 style=\"text-align: justify;\">Tax on\u00a0Surrender of Pension policy or ULPP<\/h3>\n<p style=\"text-align: justify;\">The surrender value received on account of a Pension policy or ULPP is fully taxable.<\/p>\n<h3 style=\"text-align: justify;\">Tax on Maturity of Pension policy or ULPP<\/h3>\n<p style=\"text-align: justify;\">Policyholder has the option to withdraw 1\/3 of maturity amount as lump-sum and is tax free under section 10(10D). The rest 2\/3 of corpus has to be used to buy annuity. Annuity income is fully taxable at applicable income tax slabs.<\/p>\n<h3 style=\"text-align: justify;\">Tax on Proceeds of Pension policy or ULPP on Death<\/h3>\n<p style=\"text-align: justify;\">The proceeds received from life insurance policy or ULIP on death of policyholder to their nominee is tax free under Section 10(10D).<\/p>\n<blockquote>\n<p><strong>Download:<\/strong> <a href=\"https:\/\/www.apnaplan.com\/how-to-save-tax-fy2019-20\/\">Free ebook for Income Tax Planning for FY 2019-20<\/a><\/p>\n<\/blockquote>\n<h2 style=\"text-align: justify;\">TDS on Life Insurance Policy and Pension Plans:<\/h2>\n<p style=\"text-align: justify;\"><a href=\"http:\/\/www.apnaplan.com\/budget-2014-impact-on-your-money-taxes-and-savings-2\/\">Budget 2014<\/a> (under new section 194DA) allowed deduction of 2% of the full surrender\/maturity value in case the tax exemption under Section 10(10D) was not applicable and the value is more than Rs 1 Lakh. <a href=\"http:\/\/www.apnaplan.com\/tax-law-changes-june-2016\/\">Budget 2016<\/a> reduced the TDS amount to 1% of the\u00a0surrender\/maturity value.<\/p>\n<p style=\"text-align: justify;\"><a href=\"http:\/\/www.apnaplan.com\/tds-fd-rd-fixed-recurring-deposit-epf\/\"><strong>Budget 2015<\/strong> has introduced the facility to fill Form 15G\/15H<\/a> in case your annual income is less than the minimum taxable limit and you don&#8217;t want TDS deducted on Life Insurance maturity payment. This would be effective from June 1, 2015.<\/p>\n<h2 style=\"text-align: justify;\">Life Insurance Policy and Pension Plans\u00a0in Income Tax Return?<\/h2>\n<p style=\"text-align: justify;\">In case the <strong>maturity\/surrender value is tax free, you should mention the same in exempted income<\/strong>. In case the maturity\/surrender value is taxable mention it in \u201cIncome from other sources\u201d and pay tax on total maturity\/surrender amount (without deduction of premium paid) received.<\/p>\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Insurance &amp; Pension Products have been most miss-sold financial product in last few years. Most buyers are lured into it in the name of good returns, added life insurance along with tax savings. After a few months\/years the policy holder realizes that he has been sold a dud product and the only way to get [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":8556,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[5,3013,16],"tags":[465,3586,2562,2490,2491,896,2417,2492,3587],"uagb_featured_image_src":{"full":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity.png",1021,551,false],"thumbnail":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity-150x150.png",150,150,true],"medium":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity-300x162.png",300,162,true],"medium_large":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity-768x414.png",768,414,true],"large":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity.png",1021,551,false],"1536x1536":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity.png",1021,551,false],"2048x2048":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity.png",1021,551,false],"yarpp-thumbnail":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2017\/08\/How-are-Life-Insurance-and-Pension-Policies-Taxed-on-Surrender-and-Maturity.png",120,65,false]},"uagb_author_info":{"display_name":"Amit","author_link":"https:\/\/www.apnaplan.com\/author\/admin\/"},"uagb_comment_info":31,"uagb_excerpt":"Insurance &amp; Pension Products have been most miss-sold financial product in last few years. Most buyers are lured into it in the name of good returns, added life insurance along with tax savings. After a few months\/years the policy holder realizes that he has been sold a dud product and the only way to get&hellip;","_links":{"self":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts\/8554"}],"collection":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/comments?post=8554"}],"version-history":[{"count":0,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts\/8554\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/media\/8556"}],"wp:attachment":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/media?parent=8554"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/categories?post=8554"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/tags?post=8554"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}