TDS deducted under section 194 DA

It will be income from other sources and you will have to pay tax based in your slab I.e. 30%

Please feel free to call/ revert in case you need more clarity.

Thanks and regards

Abhishek Dugar

CA CS B.Com

Hi

The amount earned would be treated as Other Sources income and tax has to be paid @30%.

However, please share the amount of sum assured and date when policy was taken to know whether any exemption applies.

No, this is not a capital gain, hence no exemption.

Hi,

Before we start the reply, please note that you have not mentioned the amount assured by way of the policy mentioned by you. I assume it is less than 10% of the annual premium i.e. the capital assured amount should be more than Rs. 60 Lakhs.

Further, I also assume that the policy was purchased by you on or after 01.04.2012.

If the above assumptions are true, the whole of the amount received by you on maturity/ redemption of the ULIP i.e. Rs. 36.50 Lakhs shall be exempt from Income Tax u/s 10(10D)(d) of the Income Tax Act, 1961.

Hence, this implies that you can claim exemption of entire amount received by you in your Income Tax Return under the above said section.

For your convenience, Sec. 10(10D)(d) is reproduced as below:

"Sec. 10(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—

a)...

b)...

c)...

d) any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured:

Provided that the provisions of sub-clauses (c) and (d) shall not apply to any sum received on the death of a person:"

I hope your query is resolved.

Feel free to revert for any clarification.

Regards,

CA. Sunny Thakral

Hello,

It will be income from other sources. It will be taxable at rate of 30% . It is not covered under long term capital gains.

Also indexation benefits are for Long term Capital Gains, Not for ULIP Plan.

I hope your query is resolved.

The entire proceeds of 36.5 lacs will be included in your income as income from other sources. No tax benefit is available for same. Therefore, you are advised to deposit the balance tax on or before 15th March as Advance Tax to avoid paying interest on tax.

Hi,

ULIPs and Mutual Funds are two distinct products, wherein, in contrast to Mutual Funds, ULIPs have following characteristics:

1. ULIPs are basically insurance products, wherein sum assured is coupled with returns on annual premia

2. Annual premium on ULIP is eligible for deduction u/s 80C

3. ULIP have a minimum lock in period of 5 years

4. Entire amount on maturity is eligible for exemption u/s 10(10D)(d)

Hence, keeping in view the above facts, contributions to and returns from ULIPs have distinct taxation treatment than normal mutual fund schemes.

Regards,

CA. Sunny Thakral

The income earned shall be assessable under the head income from other source @30%.

As this is not a capital gain, no LTCG benefit will accrue.

Dear Sir,

Since it is an ULIP Plan, premium paid consists of two parts- one is insurance premium and other is investment premium. If the ULIP has been purchased by you after 01.04.2012 and the insurance premium paid by you is less than 10% of the sum assured for all the years then the entire amount received by you will be exempt u/s 10(10D) otherwise taxable.

If the insurance premium amount paid is more than the 10% of the sum assured in any of the year, entire amount will be taxable.

First from the Insurance policy cover note and terms and conditions of the policy, find out the amount of insurance premium paid.

Thanks & Regards

CA Vivek Arora

As per Section 10(10D) of the Income Tax Act, 1961 the amount of sum assured plus any bonus (i.e. the policy proceeds) paid on maturity or surrender of policy or on death of the insured are completely tax free for the receiver subject to certain conditions.

These policy proceeds will be taxable in the hands of the insured in the following situations:

As per section 10(10D) in case of a life insurance policy issued after 1.4.2003 but on or before 31.3.2012 if the premium payable in any year exceeds 20% of the actual sum assured, then the policy proceeds would be taxable in the hands of the insured. As per section 10(10D) read with explanation to Section 80C(3A), actual sum assured simply means the sum assured which is least in all the policy years and does not include any bonus amount which is to be received over and above the assured amount. This 'actual sum assured' shall also not include any premiums which are to be returned to the policyholder.

o For policies issued on or after 1.4.2012, the above mentioned limit of 20% has been changed to 10%.

In case the insured suffers from severe disability or disease as specified by the Income Tax Act and rules and his/her policy was issued on or after 1.4.2013, then for them the limit of 10% will be increased to 15%. For this purpose, disability has to be one of those specified in section 80U (like autism, mental retardation) and disease has to be one of those specified in section 80DDB read with Rule 11DD of income tax rules such as blindness.

o In case the premium payable in any year exceeds the prescribed percentage i.e. 10%, 15% or 20% of actual sum assured, as described in the preceding paragraphs, then the whole proceeds from the policy would get taxed in the year of receipt. However, in case of death of the insured, where his nominees receive the policy proceeds the same shall be tax free in the hands of the nominee(s) even if premium paid in any year crossed the prescribed percentage of sum assured.

In your case, assuming that the policy was taken before 31 Mar 2012, there will be no tax liability on the maturity proceeds.

However if the policy is taken post this date and assuming that the sum assured of the policy is 30 lakhs, the total proceeds will be taxable as the premium per annum paid is in excess of 10% of the sum assured.

Hope this explanation helps.

Since the premium amount is less than 20% of the sum assured the whole amount is tax exempt. Hope this helps

Hi,

Tax liability to be paid as Self Assessment Tax =

(36.50 lacs - 30.00 lacs) *30% - 36,500 = 1,58,500.

No long term tax benefit available .

Thanks

CA Shubham Jain

You have to add such income to your total income while filling your income tax return and as you mentioned you are in 30 % tax bracket, you have to pay additional tax of 28% since 2% have already been deducted by insurance company.

Maturity receipts on ULIP is exempt u/s 10(10D) of the Income Tax Act. Therefore no tax liability arises.

If the premium paid on the policy is less than 10% of the sum assured during the term of the policy the amount received on maturity are exempt from tax. (For policies purchased before 1st April 2012, the premium must be less than 20% of the sum assured). This exemption is allowed under section 10(10D) of the Income Tax Act. You must report this as exempt income in your income tax return.

If the premium amounts are more than the % prescribed above, the entire money received at maturity has to be added under Income from other sources in the income tax return. This shall be taxable at the slab rate applicable to you.

If the premium paid on the policy is less than 10% of the sum assured during the term of the policy the amount received on maturity are exempt from tax. (For policies purchased before 1st April 2012, the premium must be less than 20% of the sum assured). This exemption is allowed under section 10(10D) of the Income Tax Act. You must report this as exempt income in your income tax return.

If the premium amounts are more than the % prescribed above, the entire money received at maturity has to be added under Income from other sources in the income tax return. This shall be taxable at the slab rate applicable to you.

The income is exempt u/s 10(10D). We can take the refund of the same

Under sec10(10D) of income tax act, ulip policy where premium payable to the sum assured does not exceed 10% the amount received on partial withdrawal or on maturity is exempt from tax (for the policies purchased before 01/04/2012, the premium to sum assured should not exceed 20% for the proceeds to be tax free.

if the above ratio exceeds the prescribed limit any time during the term of policy future proceeds of the policy will be taxable except in case of death, such income taxable under head income from other sources.

Can you tell me what is premium paid and amount assured, if that is clear taxability can be explained.

As Depends upon the period when you took the policy. Upto 31.3.12, any policy carrying a premium exceeding 20% of the sum assured in any year is taxable and in that case, the proceeds are taxable.

In your case, since the amount of 6 Lakhs is less than 20% of 36.5 Lakhs, proceeds are not taxable.

With effect 1.4.12, 20% has been replaced by 10%.

You may refer section 10(10D).

Further, since the proceeds exceed 100000, TDS @ 1% is applicable in this case.

Thanks

Hello,

You will have to go through your policy document to find out if the redemption proceeds were taxable or not ?

Thanking You.

Regards,

Rohit R Sharma

BCOM, FCA, LLB, CERT. FAFP