This video discusses the tax implications of the surrender of life insurance endowment plans
Edited highlights
0:17 This video will discuss the tax implications of the surrender of life insurance endowment plans
1:46 Remember, lot of people claim tax deduction for life insurance endowment plan premiums
2:31 In India, there are three stages when tax can impact an investment
2:41 The first stage is the initial stage when you have bought the life insurance plan. The investor has to check before buying whether he or she will get tax benefits
2:52 The second stage is the intervening stage between buying the plan and maturity of the plan
3:01 The third stage is the maturity of the plan
3:04 In case of life insurance plans, you initially get the benefit of Section 80C
3:15 If your premium is upto Rs 1.5 lakh i.e. the limit of Section
80C, you get the tax deduction provided your yearly premium doesn't exceed 10% of sum assured
3:32 If you have bought a plan for a 20 year term, the company announces some bonus or getting partial sum insured in case of a money back plan
3:42 All these payments in the intermediate stage are tax free
3:47 The maturity amount is also tax exempt. So, life insurance is typically tax exempt in the three stages
4:18 If someone has surrendered the plan before two years of the inception of the plan, then the surrender value would be taxable
4:25 It would also be added to the income of the person and hence taxed as per the tax slab
4:32 If the person surrenders the plan after two years, it is also exempted from tax
5:01 If the person surrenders the life insurance endowment plan before 5 years, the surrender value will not be taxed, but the tax deductions claimed, will have to be foregone
5:20 So, to continue availing Section 80C benefits, you need to continue the plan for 5 years
5:29 If you are taking the proceeds of surrender value the minimum stipulated period is 2 years
6:14 Remember, you don't recover your life insurance endowment plan premiums till well into the term of the plan
