Investment in units of ulip of lic

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PUNEET GOYAL (Querist)
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09 November 2011 If investment made in units of ULIP of LIC has been withdrawn before the expiry of 5 years then what will be the tax treatment?

A person has made investment in ULIP in fy 2005-2006,2006-2007, 2007-2008 (of rs 25000*3= 75000/-)and withdrawn the same in 2009-2010 and got rs. 90000/-. Now please tell me the tax treatment in above case.

Thanks in advance

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 November 2011 In case he has taken deduction U/s 80C, in respect to such units, has to be shown as income in the year of withdrawal.
(Section 80C(5)(ii) and Section 80C(2)(xi) may be referred)

PUNEET GOYAL

PUNEET GOYAL (Querist)
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09 November 2011 Thanks sir,

I further want to know that:

1. In which head of income Rs. 75,000/- will be taxed?

2. Excess amount i.e. Rs. 15,000/-. Whether it is exempt income or exempted capital gain or taxable income? If it is taxable income then under which head it is to be taxed?

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CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 November 2011 As we have a residual head- i.e. Income From Other Sources, it can be shown there only.
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As far as Rs 15000/-is concerned, I am not of the firm opinion that it should be taxed as interest or under IFOS.
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It is true that the investments was made in Units which is a capital asset.
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In case of units, if held for more than 12 months, these are treated as Long Term capital asset.
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I am not aware that LIC pays STT on transfer of such units. If it's so, it's an exempt LTCG.
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In case STT has not been paid by LIC, then indexation benefit can be taken.
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