I had purchased Bajaj Allianz Max Advantage Insurance Plan (Equity Index Fund II) in January 2011. Annual premium was ₹25,000 and the sum assured was ₹2.5 Lakh. I paid first three premiums but could not pay the last two premium. I also availed tax deduction u/s 80C for the three premiums paid. After the non payment of premium, fund was transferred to discontinued fund. As of now, the ULIP is out of lock in period of five years and the discontinued fund value is ₹90,800. What is the tax implication if I surrender and get the proceeds? Is it taxable or tax-free?
- Sunil K Gupta
This is a limited premium payment Unit Linked Insurance Plan (ULIP). You can surrender the policy only after five years. As far as the taxation is concerned, you will have to add the deductions claimed earlier to your income and pay taxes on it. Surrender value will also be added to your income and taxed accordingly. As policy sum assured was more than five times the annual premiums, the company will not deduct any TDS. For more details on taxation of insurance refer here: Taxation on insurance products.
This article was originally published on October 19, 2015.
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