CGT on Policies purchased in LIC International when I was an NRI

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self
21 Points Joined January 2025

Hello,

 

I am currently a resident tax payer.  However, when I was a NRI, I purchased the following policies from LIC International (a subsidiary of LIC of India)

  1. Endowment policy (Premium start 2010 and end 2014)
  2. Professional education plan (Premium start 2010 and end 2014)
  3. Participating marriage/education plan (premium start 2013, supposed to continue till 2018 but discontinued after half premium paid in 2016)

Total premium paid in each of the cases was > 20% of the sum assured.

I would be grateful if you could advise it these policies will face Capital Gain Tax upon maturity (starting soon) and if yes, its calculations.

Thanks in advance.

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On 15 January 2025 at 13:32 Report
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Master in Accounts & high court Advocate
9447 Points Joined December 2011

As a resident taxpayer, you're concerned about the tax implications of your LIC International policies purchased during your NRI days.

Tax Implications The tax implications for these policies depend on the type of policy, premium payment, and sum assured.

Endowment Policy and Professional Education Plan Since the premium payment for these policies ended in 2014, and you've been a resident taxpayer for some time now:

1. _Exemption under Section 10(10D)_*: The maturity proceeds of these policies might be exempt from tax under Section 10(10D) of the Income Tax Act, 1961, as the premium paid was more than 20% of the sum assured.

2. _No Capital Gains Tax_*: As the policies are exempt under Section 10(10D), you won't have to pay Capital Gains Tax on the maturity proceeds. Participating Marriage/Education Plan For this policy, the premium payment was discontinued in 2016:

1. _Surrender Value_*: Since the policy was discontinued, you'll receive the surrender value, which might be taxable.

2. _Capital Gains Tax_*: The surrender value will be taxed as capital gains. You'll need to calculate the capital gains by subtracting the total premium paid from the surrender value.

3. _Tax Calculation_*: The capital gains will be taxed at the applicable slab rate (depending on your income tax slab).

Calculating Capital Gains (if applicable) To calculate the capital gains for the Participating Marriage/Education Plan:

1. _Determine the Surrender Value_*: Obtain the surrender value from LIC International.

2. _Calculate the Capital Gains_*: Subtract the total premium paid from the surrender value.

3. _Apply the Applicable Tax Rate_*: Calculate the tax payable on the capital gains based on your income tax slab. 

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On 15 January 2025 at 13:56


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