- At Maturity of ULIP: Upon the completion of the tenure of your Unit Linked Insurance Plan, when they mature, the total amount received by you or your nominee will be completely exempted from tax under section 10(10D), if the following conditions are satisfied.
- For ULIPs purchased after 1st April 2012 : When the premium is less than 10% of the sum assured, amount on maturity will be exempted under section 10(10D). If the premium is more than 10% of the sum assured then the entire amount is taxable, except in case of death.
- For ULIPs purchased before 1st April 2012 : When the premium is less than 20% of the sum assured, then the maturity will be exempted under section 10(10D). If the premium is more than 20% of the sum assured, then the amount received on maturity is taxable, except in case of death.
- If ULIP is surrendered
- Before lock-in-period : If the policy is surrendered before the lock-in-period of 5 years, then the entire surrender value will be treated as income for the current year and will be added in Gross Total Income and thus will be taxed as per applicable tax slab rate of the individual.
- After lock-in-period : If the policy is surrendered after the lock-in-period of 5 years, then the surrender value will be exempt from taxation and assured can avail the tax benefit.
Agricultural income is not taxable under Section 10 (1) of the Income Tax Act as it is not considered as a part of an individual’s total income. However, the state government can levy tax on agricultural income if the amount exceeds Rs.5,000 per year. However, this income is considered for rate purposes while calculating the income tax liability of the individual.
For all other normal purposes, the tax calculation will involve the following steps:
- Including the Agricultural Income – Say ‘X’ is the base income of the individual and ‘Y’ is the agricultural income, tax first needs to be computed on the amount of X+Y. Let’s call this “tax as T(X+Y)”
- Adding the basic tax slab benefit – Subject to the amendments the basic tax slab might change, but for clarity’s sake let’s consider that as ‘S’. That needs to be added to the agricultural income and another tax is be calculated on the amount. Let’s call this “tax as T(S+Y)”
- Thus Final Tax = T(X+Y) – T(S+Y) and add/(Less) Surcharge, Health & Education cess, (Rebate),etc., as may be applicable.
*One should always remember to aggregate the agricultural income while calculating tax since that can allow one to avoid unnecessary extra taxes or interest on taxes.