Tax liability on surrendered value of lic

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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)

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.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

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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