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If investment made in units of ULIP of LIC has been withdrawn before the expiry of 5 years then what will be the tax treatment?
A person has made investment in ULIP in fy 2005-2006,2006-2007, 2007-2008 (of rs 25000*3= 75000/-)and withdrawn the same in 2009-2010 and got rs. 90000/-.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.
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)
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?
09 November 2011
As we have a residual head- i.e. Income From Other Sources, it can be shown there only. . As far as Rs 15000/-is concerned, I am not of the firm opinion that it should be taxed as interest or under IFOS. . It is true that the investments was made in Units which is a capital asset. . In case of units, if held for more than 12 months, these are treated as Long Term capital asset. . I am not aware that LIC pays STT on transfer of such units. If it's so, it's an exempt LTCG. . In case STT has not been paid by LIC, then indexation benefit can be taken. . Let's have views of our experts in CAclub also.
CAclubindia
