I had one policy name as reliance life insurance cash flow plan policy, this is money back policy, the term of the policy is 10 years. sum assured was 736800 and installment paid is 99693 yearly. TDS is been deducted on the same policy and the amount is being reflected in the 26As. The policy was started in August 2012 and I'll be receiving some of the amount after completing 2 years which means i'll be receiving some of the amount(just say like 100000) in every 2 year, I just want to confirm what will be the treatment of the same. whether I'm liable for any deduction u/s 80c or anyother section?

Dear Meenakshi,

The proceeds from a cash back life insurance policy will be considered as insurance maturity proceeds under Sec. 10(10)(d). These will be completely tax free.

Since the proceeds are income and not an investment at the maturity stage, the same cannot be considered for the Section 80C deduction.

For Sec. 80C benefits, premium paid towards a life insurance policy with a cover of 10 times or more of the premium will be eligible.

I had taken sbilife shubhnivesh in 2011 and i paid Rs.50000 for five years and in 2016 igot back the maturity amount to my account about Rs.263800. Tds was cut about 1% of the total amount as shown in 26a. Now while filing ITR, my tax consultant says i should pay 30% of 263800 ( total amount received) But i say that only 30% of Rs.13800 ( total gain on the policy) is to be paid by me . Please help me in resolving this issue at the earliest. If possible please reply immediately so that i can file the return today.

Sorry for the delay in the response, Mr. Rao.

In our view, only the gain is taxed (i.e. what you received minus what you paid). What you have paid is already taxed (through income tax).

Is ITR1 the correct form for income under 194DA ?
In the ITR1 form, where should such income be mentioned ?
Note: A TDS has already been deducted at 1% by Life Insurance company before paying out the money.

Siddhant, you will need to use the form as per your IT-related status.

Whatever TDS is already paid can be adjusted against balance tax payable or claimed as refund, as the case may be.

Hi,
I have taken SBI life insurance policy in 2010. I have yearly 30000/- for 5 yrs totalling to Rs.1,50,000/-.Now i have recd Rs.1,33,000 as maturity amt. SBI has deducted 2 % TDS . It is reflecting in my FORM 26as. Its a loss for me how to claim 2% TDS ded. and how to show in ITR. Can i show loss as 133000-150000 in income from other sources and get set off against salary income.

TDS rule is effected by life insurance companies irrespective of whether there is profit or loss. You need to claim this as a loss and hence no tax is payable. The TDS already paid can be set off or claimed as a return.

Hello, I had taken ICICI prudential Life Time policy in Dec 2005. Sum assured was initial death benefit 2L , Accident & disabilty 2L. I paid premium of 30k per yer till December 2015. In January 2017 I had partially withdrawn 2L, current value was about 5.43L. ICICI has deducted 2000 Rs ( 1% of 2L) under 194DA, my query is this partial withdrawal considered as income and do I have to pay income tax on this withdrawal as well ? Kindly guide

It depends on the annual year in which it was withdrawn. If the SA: Premium ratio was maintained throughout the year then no tax is payable. If not, you will need to pay tax on the gains.

Sir, partial withdrawal of 2L done in March 2017. Premium was 30K and benefit of policy death benefit 2L, accident benefit 2L. This 30k paid every year for 11 years starting December 2005. For premium ratio should we consider 2L or 4L . Ratio would be either 15% or 7.5 %. Thanks

Madhavi, please consider SA as 2 Lakhs. Rider Sum Assured cannot be added for this purpose.

Thanks sir

I had taken a single premium LIC Jeevan Dhara Policy in July 2001 . the amount paid was 21,600/- maturity received is Rs.1,01,550/- in the last year in October 2016. LIC told me only taxable policies TDS shall be deducted and this proceeds are tax free.No TDS was deducted.
Now my accountant is not clear.
I shall be grateful if someone can clarify in this regard.

What was the Sum Assured of your policy?

There is no mention od sum insured on the policy neither was TDS deducted.When I had purchased the New Jeevan Dhara policy in July 2001, I was told if the period is more than 10 years the lump sump shall be tax free

Chetan, New Jeevan Dhara is NOT a life insurance plan, it is a pension plan. Pension plan payouts are not tax free except the commuted part which cannot be more than 1/3 of the accumulated corpus. In all probability, the amount that you received might be the commuted benefit and if that is indeed the case, it would be tax free.

I had a discussion with the LIC manager he says the option I chose was 3, wherein I have commuted my full policy, which was allowed when the policy was issued back in 2001.after 2002 this changed.

I have read this on another website replied by a CA Mr Paras Bafna. specific to New Jeevan Dhara

1. The amount of commutation of pension is being received from a fund. The income of the fund is exempt under section 10(23AAB).

2. The option of 100% commutation was allowed by the fund referred here in above at the time of issuance of the policy.

3. Section10(10A) is the relevant section dealing with the commutation of pension and taxability of commuted pension.

4. Clause (iii) of sub section (10A) of Section 10 specifically exempts any payment in commutation of pension of pension received from a fund under clause (23AAB) of Section 10.

5. Hence in my opinion the full commutation value, which is being paid by the fund mentioned in para (4) above, is not taxable in the hands of the recipient.
6. Further, Section 10(10D) makes any sum received under a life insurance policy exempt except certain exceptions. The receipt in question is also not covered by the exceptions. Hence the amount received under the life insurance policy is exempt.

Perfect. Thanks for sharing, Chetan!

I have received an official email from LIC Manager claims which says New Jeevan Dhara Policy issued before 1-4-2003 if commuted for lump sum is tax free. This has put to rest my confusion.. LIC also does not deduct any TDS whatsoever.
There was a little confusion also about the purchase price they have also clarified NCO is the purchase price which shall be returned if F option is opted which reads pension/annuity for life with return of purchase price.Hope it will also help others

That rule is applicable to only life insurance policies and not pension plans, because pension plans do not have a Sum Assured.

A while back I have got an official mail from LIC stating the policy New Jeevan Dhara is Tax free.The reply was from Manager Claims.It was in response to my seeking a written clarification.

Thanks for this information, Chetan. It will really help our readers.

In the return of income here to fill up the income of the nature on which TDS has been made u/s 194DA ? Please guide. Thanks

Paras, the question is unclear. Please share in detail.

Certain Life Insurance Policies in which the annual premium paid is more than 10% of sum assured are now not eligible for tax exemption u/s 10(10D) and accordingly the sum received against them is taxable and simultaneously the insurer is required to make a TDS u/s 194DA. My question is that as to where to show such income in the return of income. Thanks

Hi Paras, you need to show the gains, i.e. excess received over the sum of premiums paid, as income in the year in which it has come. Show it as other income. Take the advantage of TDS already paid when calculating the total tax payable for the year.

sir, I had one policy of Bharti-axa Dream life pension regular. i invested 20000/- per annum for 9 years and surrendered the policy. I was paid rs 319000. I put total Rs 180000. what will be the taxable amount. Or whole amount is tax free ? pl advice.

The ENTIRE proceeds from a pension plan are taxable in the year it it received. So the surrendered amount will be added to your income for the year in which it was received.

Please check with your tax consultant for any other dependencies that might be there.

Dear sir,
I had opted for hdfc life sampoorn samridhi insurance plan for 5 yrs. this February 2017, I completed 5 yrs and was paid the amount in my bank. The details
Policy name.. hdfc life sampoorn Samridhi insurance plan
Policy term .. 5 yrs
Premium paid.. 1lac /year
Sum assured .. 3 lac 34 000
Amount received after 5 yrs including bonuses ... 540,000
So clearly my sum assured to premium ration seems to be unsuitable to get benefit under 10d..but I used to take rebate on the premium every year under 80C ..
So now I just want to know how much tax I am supposed to file on this...on 40 thousand which I got extra or on the whole 540,000 I paid for 5 yrs..
Thanks
Tegbir

For the second part, you need to pay tax only on the gains, i.e 540,000 minus total premiums paid.

Under normal circumstances, for policies issued on or after April 1, 2012, the exemptions under 80C and 10(10d) are available only if the premium amount in any financial year does not exceed 10 per cent of the actual capital sum assured.

So you need to pay for both because you are neither eligible for 80C or for 10(10d).

Kindly advise if I surrender the following policies whether the surrender value will become taxable.
ICICI Prudential Life Time, premium 24,000, SA 3lakhs
ICICI Prudential smart kid premium 3lakhs, SA 15 lakhs.
For both policies premiums were paid for more than 5 years. Both were taken between 2003 and 2012.

ICICI Prulife LifeTime is a ULIP - SA:Premium is >10. Surrender value after 5 years is 100% of fund value. No tax on surrender value.

ICICI Prulife SmartKid is an anticipated endowment - SA:Premium is <10. Surrender value will be much lower than the premiums you have paid. We suggest you don't surrender this policy. If you do, whatever little you get will also be taxable, further increasing your losses. In the worst case, convert it into a paid up policy so that no further premium needs to be paid.

I purchased an ICICI Prulife Life Stage Pension plan during March 2010 with a annual premium of INR 99999 per year, I paid the same for the first 3 years and still the same is going on live. I would like to withdraw the same, I am an NRI, can you suggest me what are the TDS rates they are going to deduct. Is it possible for me to get the TDS refunded? The policy don't have any sum assured value. Please assist

Yes, the TDS can be refunded if it is not due. You can ask for it when filing your annual return.

If applicable, TDS rates depend on whether you have declared your PAN at the time of buying - 2% if you have, 20% if you have not.

I am holding the ICICI Smart Kid new unit linked RP and ICICI life stage wealth policy,
please lets us the know, whether it is going to be tax after maturity amount receiving from these policies.
currently these policy running under equity fund of flexi growth II fund and opportunities fund
thanks
Nanjappa

Both are unit-linked policies and the fund that you are invested in does not matter. Stay invested for the entire period of the policy (or at least 15 years in case of Life Stage Wealth) so as to derive maximum benefit from the policies.

If the ratio of Sum Assured to Annual Premium is more than 10 for both plans, no need to worry - you will get the maturity amount tax free under Section 10(10d). In case you do a top-up in a particular year, ensure that the ratio is still maintained for that year, so that the benefit is tax-free.

Dear Sir,

I have 2 pension plans offered by ICICI Pru details of which are as follows:

Policy 1:
Instalments: single premium of 2 Lakhs
Commencement date: 17/03/11
Maturity date: 17/03/21
Value as of date: 3 lakhs (1/3rd can be withdrawn after 5 years, rest annuity)

Question: will the entire 1/3rd withdrawn be taxable?

Policy 2:
Instalments: 3 instalments of 1 lakh each (all paid)
Commencement date: 15/9/10
Maturity date: 15/9/20
Value as of date: 4 lakhs

Question: will the entire 4 lakhs be taxable or will 4 lakhs minus 3 lakhs premium paid be taxable

Additionally there is the following insurance policy:

Policy 3:
Instalments: single premium of 5 lakhs
Commencement date: 13/4/11
Maturity date: 13/4/21
Value as of date: 7 lakhs

Question: will entire 7 lakhs be taxable if withdrawn today or 7 lakhs minus 5 lakhs?

Please suggest. Thanks

1 & 2 : Please share the name of the policy (is it a traditional Pension Plan or a ULIP LifeTime Pension Plan)

3 - ditto. name of the policy please and the sum assured in the plan.

cheers.

Name of policy no. 1 ICICI Pru Lifelink pension SP & is ULIP plan for 10 years
Name of policy no. 2 ICICI Pru Lifestage Pension Advantage & is ULIP plan for 10 years
Name of policy no. 3 ICICI Pru Pinnacle Super SP & sum assured is 6.25 lakhs
Sir I hope now you have all details about the above policies. Pl. let me know about the tax implications. Pl. also note that I took all these policies before retiring on 31st Dec.2012 . Thanks

Dear Mr. Navin,

1 & 2 - both being Pension plans - entire 1/3rd of the value of the fund can be commuted, i.e. it can be withdrawn tax-free under Section10(10A)(iii).

3. Pinnacle Super SP is also a ULIP, but not a pension plan. In your case, the ratio of Sum Assured to Premium is 6.25/5 = 1.25, i.e. less than 10. Hence the gains from your investment are taxable. When the policy matures after 10 years, calculate tax by adding gains (maturity amount minus sum of all premiums invested) to your total income in the year of maturity. (Note : Entire tax could have been avoided if you had chosen the 500% Sum Assured benefit option which was available in this plan, however your mortality charges would be higher, thereby reducing returns marginally.)

Sir, please let us know if you need any further help.

Dear sir, first of all I would like to thank you for your quick response. Sir as per the policy bond no 1 if I surrender the policy after 5 years there will not be any surrender charges so if I surrender now and get one third of the present value I.e Rs 1 lakh, will it be tax free and the pension on 2/3rd part of annuity will be taxable or not

In the policy no. 2 I have paid all the three premiums so if I surrender it now I.e before maturity will only gain part (Rs. 1 Lakh) be taxable or the tax will be charged on the total present value which is 4 lakhs

In policy no. 3 if I surrender it now i.e before maturity , will only the gain part ( 2 lakhs ) be taxable or the tax will be charged on its whole present value I.e Rs. 7 Lakhs.

I hope the matter is clear to you . Please give your valuable advice

Please consult a tax practitioner to confirm the views below.

Policy 1 & 2 are both ULIP Pension plans. On surrender of a pension plan, the ENTIRE surrender value is added to your income in the year of receipt and taxed. Also, if you had claimed 80C benefit on premiums paid, it would need to be reversed and tax paid if applicable. Further, 2/3rd of the surrender amount should be used to buy an annuity. Surrender is not recommended unless there is an emergency requirement of funds. Instead, it is better to wait it out till the policy matures and avail of the commutation benefit of 1/3rd + annuity from 2/3rd of the accumulated fund value.

For Policy 3, the earlier answer still holds because the ratio of sum assured to premium is less than 10. In case you surrender, the gains (maturity amount minus sum of all premiums invested) will be taxed.

Dear expert just wanted to understand. Section 194DA is it applicable to pension policy taken from an insurance company dated 2010. Money is paid from NRE account will there be still TDS if yes than what percent. Need your opinion on it.

Nope, Rajesh.

That's because pension plans do not have a 'return'. There are only commutation and compulsory annuity. Commutation is limited to one-third of purchase price and is tax free under Section Section 10(10A) iii, clause 23AAB, and annuity received is taxed by adding it to the income in the respective year.

Good idea to buy a pension plan, but you may want to build a separate fund for it given that all pension funds have compulsory annuity which is not transferable. Let us know if you need any help with that.

Also hope you have a good term plan to protect your income till retirement. In case you don't, here's the MintWise link to do that.

https://www.mintwise.com/te...

Hope clear. Good luck, Rajesh.

Dear Team thanks for your reply. Just help out to get more clarity what if the client surrender will they have any Tax repurcation on it considering money is paid from NRE account

Surrender value is always LESS than premiums paid. Hence there cannot be a 'gain'. In fact, there would be a 'loss' on premiums paid. In our opinion, there is no question of tax liability in such a scenario.