What is the tax treatment on the sum received at the time of maturity or Surrender of ULIP’s?

  1. 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.
  2. 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.

Leave a Reply

Your email address will not be published.