Ltcg after 31.01.2018 on policy maturity / surrendered
This query is : Resolved
05 March 2018
If i had an icici pension plan policy from 2003 and i surrendered it in Feb 2018 and gets some amount in Feb 2018.
Then it is tax free or LTCG applicable ??
Please advice
Then it is tax free or LTCG applicable ??
Please advice
05 March 2018
Tax free. LTCG on equity/equity funds etc are applicable only from 1st April 2018
05 March 2018
Any Capital gains arising before 1st April 2018, is grandfathered i.e LTCG provision will not apply.
05 March 2018
Thanks for response.... but one more i want to tell you that there is premium paid (one time) more than 10% of sum of amount matured at the time of surrendered....
tax free u/s ??
tax free u/s ??
05 March 2018
Not taxable. The Rule is that the Insurance cover be minimum 10 times the premium paid. If it is minimum 10 times, then the premium amount cannot be more than 10% of the sum assured/surrendered
06 March 2018
Sir, but it is pension plan and it is surrendered before maturity, so isn't it considered in taxable income....?
e.g, i had paid Rs.500000/- lump sum in feb 13 and taken pension plan in icici and due to some reason in feb 18 i surrendered the plan and gets Rs.900000/- .... so this 9 lakh is taxable or tax free ?
e.g, i had paid Rs.500000/- lump sum in feb 13 and taken pension plan in icici and due to some reason in feb 18 i surrendered the plan and gets Rs.900000/- .... so this 9 lakh is taxable or tax free ?
06 March 2018
No tax will be applicable here as the tenure of the policy till surrender is more than two years.
Waiting for other expert's opinion
Waiting for other expert's opinion
19 March 2018
awaiting for other expert's opinion please
09 April 2018
i had paid Rs.500000/- lump sum in pension plan in icici and due to some reason in feb 18 i surrendered the plan (note: lock in period 5 year +) and gets Rs.900000/- .... so this 9 lakh is taxable or tax free ?
03 August 2024
For the surrender of a pension plan, especially an ICICI pension plan, the tax treatment depends on several factors including the type of plan, the amount received, and the premiums paid. Here’s a detailed explanation based on the current tax laws:
### **Tax Treatment of Pension Plan Surrender**
1. **Nature of the Pension Plan:**
- **Tax-Free Status:** If the pension plan is a life insurance policy, the maturity proceeds are generally tax-free under Section 10(10D) of the Income Tax Act, provided certain conditions are met.
- **Taxability on Surrender:** If you surrender the pension plan before maturity, the amount received may be subject to tax. The tax treatment will depend on whether the policy is classified as a life insurance policy and if it meets the criteria for tax-free status under Section 10(10D).
2. **Conditions Under Section 10(10D):**
- **Premiums Paid:** For policies issued after April 1, 2012, the premium paid should not exceed 10% of the sum assured. If the premium exceeds this limit, the maturity proceeds are taxable.
- **Premiums for Policies Before April 1, 2012:** For policies issued before this date, the premium should not exceed 20% of the sum assured.
3. **Tax Calculation on Surrender:**
- **Exemption Criteria:** If the premium paid is within the limits mentioned above, the maturity amount should be tax-free.
- **Excess Premium:** If the premium exceeds the specified limit (10% or 20% depending on the date of the policy), the maturity proceeds will be taxable.
### **Specific Case Analysis:**
- **Premium Paid:** You paid ₹500,000 as a lump sum premium.
- **Surrender Amount:** You received ₹900,000 upon surrendering the policy.
**Assumptions:**
- The policy was issued after April 1, 2012.
- The premium paid is more than 10% of the sum assured.
**Taxability:**
- Since the premium paid (₹500,000) exceeds 10% of the sum assured (₹900,000), the amount received on surrender will be taxable as income under the head "Income from Other Sources."
**Tax-Free Amount Calculation:**
- If the policy is a pension plan and was issued before April 1, 2012, then the premium limit is 20%. If the premium paid does not exceed 20% of the sum assured, the amount received may be tax-free.
- However, for policies issued after April 1, 2012, the limit is 10%. Since the premium paid exceeds this limit, the maturity amount is taxable.
### **Procedure and Filing:**
1. **Income Declaration:**
- The amount received from the surrender should be declared as income under "Income from Other Sources" in your income tax return.
2. **Tax Computation:**
- The taxable amount will be ₹900,000 minus the premium that exceeds the limit.
3. **Documentation:**
- Maintain all documents related to the policy, including the policy document, premium receipts, and the surrender receipt.
### **Conclusion:**
- The amount received on surrender of a pension plan where the premium paid exceeds 10% of the sum assured is taxable.
- The tax-free status under Section 10(10D) does not apply in this case because the premium limit is breached.
For accurate advice and to ensure compliance with current regulations, consult with a tax professional who can provide guidance tailored to your specific situation.
### **Tax Treatment of Pension Plan Surrender**
1. **Nature of the Pension Plan:**
- **Tax-Free Status:** If the pension plan is a life insurance policy, the maturity proceeds are generally tax-free under Section 10(10D) of the Income Tax Act, provided certain conditions are met.
- **Taxability on Surrender:** If you surrender the pension plan before maturity, the amount received may be subject to tax. The tax treatment will depend on whether the policy is classified as a life insurance policy and if it meets the criteria for tax-free status under Section 10(10D).
2. **Conditions Under Section 10(10D):**
- **Premiums Paid:** For policies issued after April 1, 2012, the premium paid should not exceed 10% of the sum assured. If the premium exceeds this limit, the maturity proceeds are taxable.
- **Premiums for Policies Before April 1, 2012:** For policies issued before this date, the premium should not exceed 20% of the sum assured.
3. **Tax Calculation on Surrender:**
- **Exemption Criteria:** If the premium paid is within the limits mentioned above, the maturity amount should be tax-free.
- **Excess Premium:** If the premium exceeds the specified limit (10% or 20% depending on the date of the policy), the maturity proceeds will be taxable.
### **Specific Case Analysis:**
- **Premium Paid:** You paid ₹500,000 as a lump sum premium.
- **Surrender Amount:** You received ₹900,000 upon surrendering the policy.
**Assumptions:**
- The policy was issued after April 1, 2012.
- The premium paid is more than 10% of the sum assured.
**Taxability:**
- Since the premium paid (₹500,000) exceeds 10% of the sum assured (₹900,000), the amount received on surrender will be taxable as income under the head "Income from Other Sources."
**Tax-Free Amount Calculation:**
- If the policy is a pension plan and was issued before April 1, 2012, then the premium limit is 20%. If the premium paid does not exceed 20% of the sum assured, the amount received may be tax-free.
- However, for policies issued after April 1, 2012, the limit is 10%. Since the premium paid exceeds this limit, the maturity amount is taxable.
### **Procedure and Filing:**
1. **Income Declaration:**
- The amount received from the surrender should be declared as income under "Income from Other Sources" in your income tax return.
2. **Tax Computation:**
- The taxable amount will be ₹900,000 minus the premium that exceeds the limit.
3. **Documentation:**
- Maintain all documents related to the policy, including the policy document, premium receipts, and the surrender receipt.
### **Conclusion:**
- The amount received on surrender of a pension plan where the premium paid exceeds 10% of the sum assured is taxable.
- The tax-free status under Section 10(10D) does not apply in this case because the premium limit is breached.
For accurate advice and to ensure compliance with current regulations, consult with a tax professional who can provide guidance tailored to your specific situation.
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