Taxation of insurance claim
N SURYANARAYANA
(Querist) 16 June 2015
This query is : Resolved
Sir, Whether under ULIP(Wealth-Plus) Policy the pre-matured withdrawal is taxable. It is a case where the policy has been taken by a person aged 62 years on 25/02/2010 for a term of 8 years and paid single premium of Rs.4 lakhs. Sum assured is Rs.5 lakhs. An amount of Rs.373672/- was received from LIC on surrender on 11/10/2014 with TDS of Rs.7472 u/s 194DA. My query is whether the entire amount is taxable under I.T.Act, 1961 for the AY 2015-16 . Please offer your valuable comments. Also state whether loss so incurred (premium paid minus maturity value) on account of investment can be allowed to be set-off under other heads of income.
Kumar Doab
(Expert) 16 June 2015
It is felt that 5 premiums are not paid/policy is surrendered before completion of 5 policy years. Since it is ULIP the premium paid after deduction of administrative expenses is used to buy units on current NAV and upon surrender units are converted in rupees as per current NAV and surrender value is arrived at as per policy T&C.
Hence whole surrender value is taxed.
You have the option of asking it from LIC in writing and demanding written and then you can show the reply to your I.Tax Lawyer, for the needful.
Rajendra K Goyal
(Expert) 17 June 2015
Consult local tax consultant and discuss in reference to your total income.
