Go AD-Free with CAclubindia Pro and Daily Mobile Updates. Subscribe Now!

Life insurance surrender value taxation

Ashis (Service) (6 Points)

31 July 2018

I have surrendered my traditional LIC policies after paying regular premium for 3.5 years from date of commencement, which is 2013. The annual premium amount was more than 10% of the sum assured value of the premium.

My 26AS shows the full surrender value amount received. What is the taxable amount ?

The total premium paid amount in my case is More than the surrender value amount received. What shall I show in my IT return under "Income from other sources"? Is it the surrender value amount received minus the premium paid amount, which will be a negative amount (loss)?

Please let me know.

Reply
Follow
Share

5 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195640 Points)
Replied 31 July 2018

1. What is the amount of deduction availed (under sec. 80C) over premium paid?

Ashis (Service) (6 Points)
Replied 31 July 2018

Section 80 C deductions availed to the allowable extent for the financial years during the premium paying tenure.

Please let me know.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195640 Points)
Replied 31 July 2018

Total surrender amount received is taxable u/h. IFOS.

Ashis (Service) (6 Points)
Replied 31 July 2018

I have not understood " u/h IFOS". Can you please clarify.

In my case the Premium Paid amount is more than the Surrender Value received thus resulting in a negative cash flow/ loss. Will this ( Surrender value) still be considered a net income for the purpose of IT return?

As per Finance Act Circular no: 7/2003 of 05.09.2013, it states that while computing the amount taxable out of maturity proceeds, premium paid by assessee shall be excluded. As per this, can I show the negative cash flow/ loss value in my IT Return under " Income from other sources" head?

I have availed 80 C deductions, however I retained the policy and paid regular premium for more than 2 years from policy commencement, so reversal/ add back of 80C deductions will not be applicable in my case. Am I right?

Your valuable inputs will be of help.