Will the surrender of LIC Jeevan Suraksha I be taxed?

My LIC Jeevan Suraksha I plan with yearly premium of ₹20000 is maturing in June 2017. If I surrender it in May 2017,will I have to pay tax on surrender value?
- Chandrashekhar Dharmik

Yes, pension plans are taxable on surrender. Surrendering the policy just a month before the maturity date is not advisable. You will incur a huge loss.

On surrender , only one third of the corpus can be withdrawn tax free. The remaining two third of the corpus has to be necessarily invested in an annuity plan and the annuities received from this is taxable as income in the hands of the recipient.

The Guaranteed Surrender Value will be equal to 90 percent of all premiums paid, but after excluding the first year premium.

This article was originally published on July 08, 2016.