Tax liability on surrendered value of lic

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 February 2012 dear sir,

i had a icici lifetime pention - II policy which i have surrendered on 19/04/2011.
Now i want to know the tax liability against surrendered value, premium paid to avail income tax benefits under section 80ccc(1)

i paid first yearly premium of this policy on 27/02/2005

thank you

Prof. Bajaj

Prof. Bajaj (Expert)
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03 February 2012 Since you have surrendered the policy after 6 years of purchase, there is no tax liability on you for whatever gains you have received from the surrender value.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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26 July 2025 Here's a clear explanation regarding the **tax liability on the surrendered value of your LIC policy**:

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## Situation:

* You had an **ICICI LifeTime Pension-II policy**.
* You **surrendered it on 19/04/2011**.
* You paid your **first yearly premium on 27/02/2005**.
* You claimed **tax benefits under Section 80CCC(1)** on the premiums paid.

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## Tax Treatment of Surrender Value:

### 1. **Tax on surrender value:**

* Since the policy was **held for more than 5 years** (from Feb 2005 to April 2011 is more than 6 years),
* As per **Section 10(10D)** of the Income Tax Act, the **surrender proceeds are exempt from tax**, provided the premium paid in any year does not exceed 10% of the sum assured.

**In simple terms:**

> Your **surrender value is tax-free** as you have held the policy for more than 5 years.

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### 2. **Premium paid and Section 80CCC(1):**

* Premiums paid towards a pension policy (like LifeTime Pension) qualify for deduction under **Section 80CCC(1)** subject to the overall limit of ₹1.5 lakh under Section 80C/80CCC/80CCD.
* Since you claimed deduction earlier, no reversal or additional tax is applicable on surrender.

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## Summary:

| Aspect | Tax Implication |
| -------------------------------- | -------------------------------------------- |
| Holding period > 5 years | **Surrender value exempt** under Sec 10(10D) |
| Premiums claimed under Sec 80CCC | Deduction allowed, no tax reversal |
| Surrender before 5 years | Taxable as income (not your case) |

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If you have any more doubts or want help calculating exact figures, feel free to ask!

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