A investor purchased a ULIP on 29/12/2018 with a yearly premium amount for Rs. 1 lakh, premium paying term - 5 years, Sum Assured - 7 lakhs.
The investor made 2 yearly premium contributions for Rs. 1 lakh each and stopped making premium payments.
After the lock-in period of 5 years, on 29/12/2023 the investor surrendered and foreclosed the policy.
He received 3.25 lakhs overall so the gain / income was 1.25 lakhs (3.25 lakhs - 2.00 lakhs premium) on 29/12/2023 from an equity oriented ULIP.
My understanding is as follows:
1) As the premium is more than 10% of the sum assured therefore 1.25 lakhs is taxable and not exempt under 10(10D)
2) As it is an equity oriented ULIP and the holding period is more than 5 years - the gains for 1.25 lakhs is to be shown under Long Term Capital Gains, Equity - 112A
3) Therefore the taxation is to be on 0.25 lakhs @ 10% - 2500+ Cess (Upto 1 lakh - no tax)
However as there are other opinions on the web:
A) "No tax liability on ULIP investment made before 01/02/2022 - Can be shown under 10(10D)"
B) "Income from ULIP is to be shown under 'Income from other Sources'."
Kindly guide if my understanding is correct or the procedure to be followed for ULIP surrender value taxation.
CAclubindia
