What happens to the tax benefits when surrendering life insurance policy?

I am 36 years old married with a daughter and reside in Hubballi.I had[NB1] availed an endowment life insurance policy a year ago and paid a premium of INR 15,000. I took this life insurance policy on advice of a friend to get the tax benefits. Now I don't want this life insurance policy and plan to surrender it. What will happen to the tax benefits I got last year?

Asked by : Mallesh - Hubballi | 291 Views

By surrendering a life insurance policy, you lose out on all the benefits of the policy and receive a much lower amount than the premium you have already paid. If you want to discontinue the endowment plan, there are two options: 1. Convert this policy into a paid-up policy without exiting it. The Sum Assured of the policy is reduced in proportionate with the number of premiums paid and total number of premiums of the policy. 2. You can surrender this policy and ask the insurer for the surrender amount by completely exiting the policy. To use the above two options you have a condition. You should have paid at least three years premium to the insurer for policies with a term of 10 years or more. For policies with a lesser term, at least two years premium payment is mandatory. In case you haven't paid even 2 or 3 years premiumand want to discontinue, the insurer will not pay you back anything and will not convert it into a paid-up policy either. The deduction you have claimed in the last year for the premium, will be considered as your income in the financial year in which the policy is surrendered/terminated and you will be taxed as per the income tax slab you fall under.