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I am planning to surrender my life insurance policy. Will I have to pay income tax on the surrender value I will receive?
The tax treatment on payment of surrender of a life insurance policy has not been separately mentioned. For the sake of tax benefits on premium payment for a life insurance policy stipulates the life cover to be 10 times the annual contribution. The same treatment will apply to surrender value, maturity value and death benefit. If income tax deduction under section 80C was claimed, then minimum holding period of the plan should be five years. If the plan is surrendered before five years of inception, then the initial deduction will be disallowed. And, the deduction claimed earlier will become chargeable to tax in the year of surrender of the policy.