I have already paid three premiums (₹85,000 per year) in SBI Life Smart Performer ULIP policy. The current fund value is ₹2.94 lakh (I have paid ₹2.55 lakh). I was thinking of not paying any more premium and surrendering the policy when the lock-in period gets over. But the problem is I have claimed tax deduction under 80C for all the yearly premiums. Please advise me if I can surrender the policy or wait for the lock-in years to get over. I fear that if I surrender the policy, I will be heavily taxed.
- Hrushikesh Patnaik
If you surrender ULIP before the completion of five years, all deductions claimed earlier will be added back to your income and taxed as per your slab rate. Also, the company would deduct TDS on your surrender value. For more details on taxation of your policy, click here: Taxation on insurance products.
There is no point in continuing with a bad investment for two more years. Cut your losses now.
Keep your investments and insurance needs separate. Buy a term plan for life insurance cover and invest in equity mutual fund schemes to achieve long-term financial goals.
This article was originally published on October 20, 2015.
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