FUTURE PLUS TAXATION

SInce u have surrendered policy it will be taxable.

    LIC's Future Plus starts paying a monthly pension from the time you turn 40. With voluntary retirement becoming a common feature and many individuals retiring early in life to pursue other interests, the Life Insurance Corporation of India (LIC) has come out with a unique proposition - Future Plus. This unit-linked pension plan (ULPP) starts paying a monthly pension from the time an individual turns 40. Once the interest rate is decided at the time of retirement, it is guaranteed for the life of the individual even if he lives to be 100, immaterial of how interest rates evolve.







Future Plus offers four fund schemes - bond fund, income fund, balance fund and growth fund - where fund management charges vary between 1 per cent to 1.5 per cent depending upon the choice of plan. LIC also charges a monthly administrative scheme at the rate of Rs 15. In the first two years it also imposes an additional administration charge of Rs 1 per Rs 1,000. Against an annual premium of Rs 10,000 invested, Rs 8,950 would go towards the purchase of units in the first two years, and Rs 9,750 thereafter. The plan also offers individuals to buy a life cover of five to 20 times the annual premium paid. Should one decide to go for a life cover of Rs 50,000, he would need to pay an additional Rs 86.5 yearly. This life cover would accrue and is guaranteed to the individual immaterial of when he dies during the life of the policy. Besides, he can opt for personal accident and critical illness covers at an additional yearly cost.



So an annual premium of Rs 10,000 in the first year would result in a policy value of Rs 3,561. Similarly, in year two, of the total Rs 20,000 paid over the years, taking annual growth rate of 6 per cent, the policy would be valued at Rs 10,940. Hence if a 35-year old individual bought a 25-year pension plan and invest Rs 10,000 annually, at the end of the period, taking an average annual yield of 6 per cent, he would get Rs 4,31,976. Should his investment grow at the rate of 10 per cent year on year, his corpus would increase to Rs 7,99,893 by the end of 25 years.



The insurance regulator insists that for illustration purposes, companies have to take a uniform rate of 6 and 10 per cent annual return on policies. This makes the cost and charges two decisive factors in choosing a ULPP. At the same time, should markets turn sour at the time of redemption of the plan, one's capital could get wiped out. Further, unlike in the case of any insurance product where redemption or surrender amount is not taxable, the surrender value under a pension product is taxed in the hands of the individual. More importantly, in the past, LIC has guaranteed an annual return of 8 to 12 per cent for its various pension plans. Policyholders would thus be losers twice over should they choose to surrender their existing policies in favour of Future Plus. In ULIPs performance depends on the fund manager and would differ from scheme to scheme while performance of traditional plans depends upon the performance of the insurance company. Since LIC allows for four free switches a year and charges Rs 100 for the fifth switch onwards, it would be wiser to understand one's risk appetite and then switch from one fund to another, depending upon market conditions. LIC offers two ULPPs. The first - Bima Plus - is a proven performer, with net NAVs ranging between Rs 18 to Rs 22, depending on the type of scheme. Bima Plus has an advantage over Future Plus in that redemption or surrender of the policy is tax free. LIC allows policyholders to surrender 50 per cent of the units after three years.

 

Contribution to  Deferred Annuity Plans :  

The premia paid for a Deferred Annuity , provided such contract does not contain a provision to exercise  an option by the insured to received a cash payment in lieu of the payment of annuity is eligible for deduction. Since Future Plus is a Deffered Annuity with withdrwal option, its surrencder is taxalble. secondly there is an exception to this ....Exemption in respect of commutation of pension under Jeevan    Suraksha &    Jeevan Nidhi Plans.  (Section 10(10A):A payment received by way of commutation of pension from Jeevan Suraksha  & Jeevan Nidhi Annuity plans is exempt from tax .

Moreover may I draw your attention to the fact that the Sale price of Bima PLus varies form 22 to 40 Rs and not upto Rs 22 as mentioned. Excellent Returns.

MATURITY ON THE 8 TH YEAR OF WEALTH PLUS POLICY OF LIC IS EXEMPTED U/S 10/10/D ANSWER ME IF I INVEST SINGLE PREMIUM NOT IN REGULAR MODE AS PER FEATURES THE MIN SUM ASSURED FOR 40000 PREMIUM IS 50000