Tax implication for ULIP Surrender after 7 years (No lock-in but premature surrender)

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manager
4 Points Posted on 19 January 2021

HDFC LIFE ULIP Plan Premium- 1lakh/year.

Tenure-15 years

Sum Assured Insurance amount- 10 Lakh (10 times of premium)

Started in Feb 2014.

 

So, it has been 7 years since I bought this ULIP and now I want to surrender it as the lock-in period of 5 years is over. I can surrender it and get full fund value as it has been more than 5 years

. My question is

1) How will this affect my 80C deduction (which I have already claimed) especially for the last 2 years? Will I have to pay tax on deductions claimed for the last 2 years. Or it is exempt as my ULIP plan is more than 5 years now.

 

2) What is the tax implication for surrender value? Is it fully exempt after the lockin period?

Thanks

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On 19 January 2021 at 23:13 Report
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Quick Summary
This discussion explores the tax implications of surrendering a Unit Linked Insurance Plan (ULIP) after the 5-year lock-in period, specifically after 7 years of policy commencement. The user is concerned about the impact on previously claimed 80C deductions and whether the surrender value received is taxable. Based on Section 10(10D) of the Income Tax Act, if the sum assured is at least 10 times the annual premium, the maturity or surrender proceeds after the lock-in period are generally tax-exempt.

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Tax consultant
5895 Points Posted on 20 January 2021
As per section 10(10D) of income tax act if the sum assured in a life insurance policy is at least 10 times the annual premium then proceeds from the policy maturity or early surrender after lock in period are tax free
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On 20 January 2021 at 07:48
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manager
4 Points Posted on 20 January 2021

Thanks for the reply!

What about the exemptions claimed in last 2 years? No implication for that as well?

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On 20 January 2021 at 10:30

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