Recently we have conducted a Quiz on life insurance and tax benefits under various provisions of The Income Tax Act and Rules .Till date(06.06.2015) we have received 914 responses ,but most of our participants have failed to provide correct answer for all the question.
If you have not already tried this quiz then try here "Quiz on Life insurance and Tax Benefits"
We have already provided you correct answer for 3 questions related to whose name Life insurance policy can be taken ,Today we are covering answer for two other questions based on topic of surrender of Life Insurance Policy before lock in period and tax benefit under Income Tax Act.
Question asked In Quiz and Answer given by participants
Ques 1: Chintamani has Surrendered a Unit Linked Insurance Plan after paying four years Contribution in FY 2015-16
- He is not eligible to claim deduction u/s 80C for FY 2015-16
- Deduction claimed in Last 3 years is to be reversed and added back as Income in FY 15-16
- Both of above
- None of above
Answers given by Participants were as under.
As shown above ,most of the persons 30.4% selected that no effect on tax benefit on surrender of Unit linked insurance plan(ULIP) after payment of 4 year premiums.29% participants were of the view that deduction of 80C not available in the year of Surrender.14% choose the option that previous years deduction is to be reversed and 26% selected the option ,both of above.
Ques 2:Deduction u/s 80C will be reversed if Life insurance policy surrendered before contributing for .............years
- 1 year
- 2 year
- 3 years
- No such restriction
Answers given by Participants were as under.
As shown above 52% persons are of the view that there is no such restriction under Income tax act,33 % thinks that the lock in period is 3 years only 14% selected 1and 2 years options
Provision of The Income Tax Act on termination /surrender of Life insurance Policy /Ulip before Lock in Period.
The related provision has been given under section 80C(5) of the Income Tax act ,which has been reproduced here under.
80C(5) Where, in any previous year, an assessee—
(i) 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 not reviving contract of insurance,—
(ii) terminates his participation in any unit-linked insurance plan referred to in clause (x) or clause (xi) of sub-section (2), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or
- (a) in case of any single premium policy, within two years after the date of commencement of insurance; or
- (b) in any other case, before premiums have been paid for two years; or
- (a) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, referred to in clauses (i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; and
- (b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.
The provisions are very clear cut ,Lock in period for Life Insurance Policy /ULIP is as under
Single Premium Policy : Two years after the date of commencement of insurance
Other Life Insurance Policy : Premiums Payment for Two years
Unit Linked Insu Plan(ULIP) : Premium Payment for Five years
Further if policy is surrendered before Lock in period then
- No deduction under section 80C shall be available in the year of surrender And
- Deduction already claimed under section 80C on payment of surrendered Insurance policy in earlier year(s) shall also be added back as your Income in the previous year in which policy has been surrendered before Lock in Period.
Correct answer for question-1 is option 3 (both of above).
Correct answer for question-2 is option-2 (2 years).
Correct answer Given by
Only 31 persons have answered both the answers correctly.Name are
RAJESH VISHWANI , Manju, SANTHOSH KOTHA, D D GOYAL, VINAYAK, G PULISHEKAR, Paresh Sanghavi, Rajat Khandelwal, V.L.Parameshwaran, Anandhi.G, Vinod Kumar P R, Ravinder Grover, Ravinder, Parthiv Kantawala, Atul Thakkar, M Saran Kumar ,santosh kashinath ban ,C.V.Saravanan , Ramesh Somaiya , ASHOK K. HEGDE , Rajesh Kumar Gupta , Paras Gupta , Ranganathan R , SAMKIT KOTHARI , RUPA BUDDHADEV , sapna jain , Chitaranjan Mohapatra , P R SUGANTHI`,sasi kumar , Pranesh
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