Hello,
I have a sister living in the US. She is an NRI since 10 years. She invested in ICICI Pru lifelink Wealth SP in 2011. It was a lumpsum investment. Policy is for 10 years and sum assured is 1.25 times premium. She issued cheque from her NRO account. Now after 5 years she likes to withdraw/surrender this policy. May I know what are the tax implication in surrendering this policy for an NRI.
Look forward to hearing from you.
SS
1 Answers
Hi,
ICICI Pru LifeLink Wealth SP is a single premium unit-linked insurance policy (ULIP).
Prima facie - The Surrender amount is not subject to tax as the no of policy years have crossed 5 years.
But kindly go through below points regarding TDS terms & conditions;
If a life insurance policy has sum assured which is less than 10 times of annual premium then the surrender amount or maturity amount of such policies are taxed. The amount is added to the respective Financial year’s income and is taxed as per the applicable income tax slab rate.
In case if the policy is issued before April 2012 then the condition is minimum 5 times of annual premium.
So, if the proceeds are taxable and amount is greater than Rs 1 Lakh, TDS is applicable at the rate of 30% for NRIs.
For Resident Indians, the tax rate is 2% (if PAN number is submitted), else it is 20%.
In case if the policy is issued before April 2012 then the condition is minimum 5 times of annual premium.
So, if the proceeds are taxable and amount is greater than Rs 1 Lakh, TDS is applicable at the rate of 30% for NRIs.
For Resident Indians, the tax rate is 2% (if PAN number is submitted), else it is 20%.
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