is LIC surrender value taxable

POSTED BY Kuntal ON June 6, 2013 5:00 pm COMMENTS (6)

Hi to all.

    I had bought 3 LIC policies (2 Jeevan Anand & 1 Komal Jeevan) in December 2008. I had paid 4 premiums (upto December 2011). After going through this site’s articles and fabulous forum, I did not pay any more premium (and Bought term plan). Now I want to Surrender these policies.

   My question is- Will my surrender value be tax-free or will I be taxed according to my slab?

   I had heard that if I surrender after 5 years from commencement of policy, then it will not be taxed. Is it true? So should I wait till after December 2013 to surrender?

  Please enlighten me.

Tks,

Kuntal.

 

6 replies on this article “is LIC surrender value taxable”

  1. Ch Rangarao says:
    July 18, 2017 at 1:46 pm

    I have surrendered LIC Samridhi plus single premium policy taken in May-2011 and surrendered in July 2016 after 5.2 years. 1% TDS under 194DA deducted. is there any exemption or I need to show in ITR-2? please clarify.

    Reply
    1. Manish Chauhan says:
      August 8, 2017 at 5:45 pm

      Hi Ch Rangarao

      This query belongs to CA domain, hence we are not the right people to comment on this issue.

      I suggest you get in touch with a CA for this in your city.

      We also have a CA partner incase you want to explore that, Just fill in your details here and they will give you a complimentary call back

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      Reply
  2. Your Name B Srinivasa Rao says:
    July 15, 2017 at 5:34 am

    Now I want to surrender my 10 policies, that surrendered amount is taxable or not

    Reply
    1. Manish Chauhan says:
      August 9, 2017 at 1:18 pm

      No, it will not be taxable if the policy has ran for 5+ yrs

      Reply
  3. bemoneyaware says:
    June 7, 2013 at 12:25 pm

    Tax benefits on life insurance policies fall under two categories :

    Deductions under 80C section :Insurance products give you deduction of up to Rs 1,00,000 from taxable income under 80C.
    Tax benefit on benefits received under section 10(10D) . Tax treatment of policy on maturity or death of policyholder, on receipt of surrender or paid-up value, is similar.

    For policies bought before 1 Apr 2012, The proceeds from the maturity or claims on a life insurance policy were exempt under Section 10(10D) if the premium was not more than 20% of the sum assured or the sum assured was at least five times the premium paid.

    According to 80C rules, tax savings on traditional life insurance plans will have to be reversed if :
    you do not keep single premium policy in force for two years after the date of commencement of the policy OR
    regular premium policy premiums are not paid for two years.

    More details at Surrendering Life Insurance Policy

    Reply
  4. Ashal Jauhari says:
    June 7, 2013 at 8:58 am

    Dear Kuntal, please surrender your policies after Dec 2013 for tax free amount.

    thanks

    Ashal

    Reply

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