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Monty (Owner)     13 March 2014

Tax implications on pension plan surrender

Dear Sir's,
 
I was having a policy  MET PENSION (Par) Plan from MetLife. I surrendered
the policy in Feb 2014 (After paying premiums for 9 years) with a Guaranteed Surrendered Value of Rs 200000/- deposited in my saving bank account.
 
I have below queries:-
 
a) Is it mandatory to purchase annuity plan from the surrender value  of pension Plans?
 
b) What are the Tax Implications on Guaranteed Surrendered Value of Pension Plan on Premature Surrender? Will the Guaranteed Surrendered Value of Rs 200000 will be taxable to me for the year?
 
Thanks 


Learning

 1 Replies

P JAMES VICTOR (ADVOCATE & TAX CONSULTANT)     18 March 2014

Dear Monty

There are three things you should consider in your case:

a. the premiums paid and claimed as part of deduction under sec.80C, during the last 9 years, will be reversed and you will have to pay tax on it.

b. the entire surrender value, Rs.2 lacs, will be added to your income, during A.Y.2014-15, and you will have to pay tax on it according to slab rates.

c. as per IRDA rule, if you want tax exemption, 2/3rd of surrender value of Rs.2 lacs, should be used to purchase annuity plan.


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