Taxability of Pre Matured LIC

There is no Income tax Liability on Prematurity of LIC

But there are Some Restrictions.

Section 80C Says that Invest in Life Insurance for at least 2 Years.

After that if You Surrender your Life Insurance, then you need not to Pay tax on Surrender Value.


Relevant Portion of Income Tax Bare Act is as under:-

(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,—

(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

(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

(iii)  transfers the house property referred to in clause (xviii) of sub-section (2) before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,

then,—

(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.