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I am a senior citizen living on pension and on some investments. In 2017, I was misled into joining a ULIP on the promise of much higher return than a fixed deposit, by a bank staff of a leading public sector bank. I paid ₹2 lakh each, for five years, and at the end of six years I got back ₹9,48,143in September 2022.
I have been corresponding with the concerned insurance company for several months and finally with the Insurance Ombudsman. In December 2023, the Ombudsman dismissed my claim and said that I was paid as per the rules and regulation of the scheme. My question is, can I show the loss, namely ₹51,857, as a Long Term Capital Loss in this year’s ITR?
Susan John
As per Section 10(10D) of the Income Tax Act (the Act), any amount received under a life insurance policy, including ULIPs, is exempt from tax under certain conditions, primarily if the annual premium does not exceed ₹2.5 lakh (monetary limit for financial year 2022-23). If these conditions are satisfied, the amount of ₹9,48,143 would qualify for exemption and should be disclosed in Schedule EI of the tax return for the Financial Year 2022-23. Since the income is exempt, no loss can be claimed against it.
If the amount of ₹948,143 was received upon surrendering the ULIP after the five-year lock-in period but before maturity, it would be considered a Long-Term Capital Gain under Section 112A of the Act. Consequently, the loss of ₹51,857 should have been reported in your Income Tax return for FY 2022-23 ( April 1, 2022 to March 31, 2023), as the amount was received in September 2022.
The deadline for filing a revised ITR for FY 2022-23 has lapsed, and any corrections can now only be made by filing an updated tax return. However, an updated return can only be filed if there is a tax liability.
Additionally, since the insurance proceeds were received in September 2022, they cannot be reported in the tax return for FY 2023-24, as they do not pertain to that financial year.
The author is a practising chartered accountant
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