Tax implications on pension plan surrender

Dear Monty

There are three things you should consider in your case:

a. the premiums paid and claimed as part of deduction under sec.80C, during the last 9 years, will be reversed and you will have to pay tax on it.

b. the entire surrender value, Rs.2 lacs, will be added to your income, during A.Y.2014-15, and you will have to pay tax on it according to slab rates.

c. as per IRDA rule, if you want tax exemption, 2/3rd of surrender value of Rs.2 lacs, should be used to purchase annuity plan.