So you had an LIC endowment policy which you have surrendered and are now wondering if you have to pay any tax on the same or not.
Or, you have a pension plan from ICICI Pru, HDFC Life and others which was not making money for you. You were naive then to buy into it but not any more. Better to put it in a more rewarding investment.
But do you know, what is your tax liability on the same?
Then there are all sorts of ULIPs and Money Backs which were sold to you and you happily bought from your banker. After all it was meant to save tax for you then and provide a tax free return later.
It was no tax, no tax and no tax all the way.
But the taxman is a step ahead. He will have his pound of flesh.
Enter the ‘fine print’ – the thing which you and I struggle to understand.
The popular opinion is that insurance policy receipts are tax free. Yes, that’s what your agent or banker also told you.
The fact is that surrender value of an insurance policy is not always tax free. There are certain rules and guidelines that need to be taken into account to determine the tax free status.
In all other cases, you have to pay the tax.
Now, if you find yourself with a surrendered policy benefit and wondering if you have to pay tax or not, here is your answer.
After 2 years of wide ranging discussions on the topic, I have just created a Guide to help you solve your tax problem.
A guide to Surrender Value Taxation – Do you have to pay tax or not?
The key questions this guide answers is:
- Will there be taxability of surrender value of an LIC policy?
- How much tax to be paid on the surrender of your pension plan?
- What if you have a ULIP? Is the surrender after 5 years tax free? (May be not!)
- Where, in your Income Tax return, should you show the receipt of surrender value?
- What about the TDS on the payout of your surrender value?
- Should you pay tax only on the gains or on the entire value?
- Can you index the gains like other capital assets?
- Do you have to reverse the Section 80C benefits of past years, in case of a surrender of insurance policy?
This is an eGuide, which covers all the important concepts as well as case studies to help you determine the taxability of insurance proceeds in your own case.
The eGuide is priced at Rs. 500. However, currently, you can download it for only Rs. 195 (plus taxes).
Use this link to pay and download.
Do share your comments and feedback with me. I will be happy to know if this guide is of help to you.