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Jyotsna Sawant (CA ) (74 Points)

30 June 2016

With regards to above subject, kindly requesting you to explain in brief whether prematured LIP is taxable or not.

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8 Replies

subhash kumar jha (PROFESSION) (445 Points)
Replied 30 June 2016

U r talking about surrender value , correct ?

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Harshit Kabra (INVESTOR) (Student CA final) (1113 Points)
Replied 30 June 2016

hllo ,

here pre-mature are arsing due to the following -

1. Death of policy holder

Insurance policy proceeds received by the family members in the event of death of the policy holder is completely tax exempt under Section 10 of the Act.. The family member needs to produce the death certificate to the insurer along with required proofs and directly claim the insurance amount.

2. surrendering the policy before maturity

If you surrender the policy before maturity, the taxability would depend on whether you have paid 5 premiums on the policy or not. If you have paid so, taxability would be nil. Else, the surrender value will be added to your total income for the year and taxed accordingly.

regards

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Jyotsna Sawant (CA ) (74 Points)
Replied 30 June 2016

Harshit

Please mention section

Jyotsna Sawant (CA ) (74 Points)
Replied 30 June 2016

As per 80C (5),

where, in any previous year an assessee

1) terminates his contract of insurance referred to in clause (i) of sub section (2) by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium by no reviving contract of insurance,---

a) in case of any single premium policy, within two year after the date of commncement of insurance or

b) in any other case before premiums have been paid for two year

then-

a) No deduction shwall be allowed to the assessee under sub section 1

b) the aggregate amount of deduction of income so allowed in respect of the preious year or years preceding such previous year shall be deemed to be income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year