Is the ULIP Policy Surrender Value Taxable?

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term Plan

Protect Your family’s financial future with Kotak e-Term Plan. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Health Shield

Insurance against medical expenses related to heart, brain, liver and Cancer. Know more

Is the ULIP Policy Surrender Value Taxble?

Is the ULIP Policy Surrender Value Taxble?
  • 16th Mar 2022 |
  • 2,234

Investing in an insurance policy is considered a long-term investment plan. This is because the longer you invest in an insurance policy, the better your returns. This goes with both traditional insurance plans and modern insurance plans like the Unit Linked Insurance Plans. ULIP is a financial tool that serves in bridging the gap between various investment options and, at the same time, helps in significant tax savings. Today, ULIP, despite being a life insurance product, is considered a more reliable long-term wealth creation option compared to others. This is because if you look at some of the best ULIP plans in India, you will note that an investor is getting the benefit of a good return on investment, protection, and tax-saving option all in a single product.

However, despite being a good long-term investment option, many investors may have different reasons to surrender their ULIP policy. In this article, we will discuss whether the ULIP policy surrender value is taxable, what are the charges and taxes to be paid if a policyholder chooses to discontinue ULIP policy, what is the taxability on ULIP on maturity, how to calculate surrender value of ULIP policy and other important details related to the policy’s surrender.

What do you mean by ULIP policy surrender?

Surrender means to stop and submit. Here, ULIP policy surrender means that as a policyholder, you want to stop investing further and are submitting the policy to the insurer. This is done to receive the NAV of the ULIP policy as liquidity or ready cash.

When can you surrender a ULIP policy?

As a policyholder, you can surrender a ULIP policy as and when you wish to. However, you must know that every insurance policy comes with a mandatory lock-in period. In the case of ULIP policy, lock-in period is five years. If you discontinue the ULIP policy before the lock-in period, you might have to pay the penalty and other charges. Thus, it is recommended to not discontinue the ULIP policy before the completion of five years.

The best time to surrender a ULIP policy is post its maturity time. Since you would have planned the long-term insurance and its maturity period, it is suggested that you extract the investment once it has reached maturity. This will help you in maximizing the returns. The best ULIP plans in India offer varied maturity periods of more than five years.

Taxability on ULIP surrender value

There can be two scenarios of surrendering the ULIP policy. One where the policy has not completed the lock-in period and the other where the policy has completed the lock-in period. Let us discuss them individually.

Taxability on ULIP before maturity

According to the experts, if the policy is surrendered before the minimum lock-in period of five years, the full surrender value is considered as an income for the current fiscal year and is added to the total gross income for that fiscal year. Based on this value (total gross income after adding the deposited surrender value), the applicable tax slab is identified, and the individual has to pay taxes accordingly


There are additional discontinuation charges to be paid if an individual chooses to discontinue ULIP policy.

Taxability on ULIP on maturity

In case you surrender your ULIP policy after completion of the lock-in period or post its maturity, you will not be charged with any additional fee. Also, the taxability on ULIP on maturity is null, meaning it is exempt from taxes. Therefore, the entire surrender amount that you receive after the maturity/lock-in period is tax-free.

The best way to calculate the surrender value of ULIP policy and taxes applicable to it is to ask your insurer. Seek out a professional’s help and avail the best options available!

Kotak e-Invest

In this policy, the investment risk in the investment portfolio is borne by the policyholder.


  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521


Browse our library of resources

- A Consumer Education Initiative series by Kotak Life

Similar Articles

Who Gets the Benefit After the Maturity of ULIP: The Proposer or The Life Insured?

What is the difference between Life Insurance and ULIP?

What is NAV in ULIP, and How is it calculated?

Importance of Retirement Planning

How to Win at Retirement Savings?

8 Charges in ULIP That You Must Know

What are the 4 Financial Phases of Retirement? How to Budget For Each One?

Types of Retirement Plans

Are You Planning an Early Retirement? Here's Why Buying Annuity Plan Will Make Sense

5 Steps to Gift a Smart Retirement Plan to Your Parents

Single Premium ULIP or a PPF - Which One is Better?

ELSS vs ULIP: Which is a Better Investment?

What is the Minimum Lock-in Period for ULIP?

What is Premium Redirection in ULIPs Plans | ULIP Insurance Plans | Kotak Life Insurance

Retirement and Pension Plans in India- What are Your Options?

Types of Annuity Plan | Annuity Definition - Meaning & Key Benefits | Kotak Life

Is ULIP a Good Option for People Above 60?

How should one decide on fund allocation within NPS?

Retirement: A New Start to Life!

Can NRIs Invest in ULIP Plans Offered in India?

How To Keep Your Retirement Accounts from Being Hacked?

Save Early to Keep Living Your Dreams Post Retirement

Understanding Annuity Plans

Is it Suggestible to Take a ULIP Plan Linked with a Term Plan?

Saving for approaching retirement with retirement insurance

Which Pension Plan Suits You best?

Importance of financial Planning for Retirement

How Much Corpus Does One Need for Retirement?

How To Invest Money In ULIP?

What are ULIPs and their Types?

Is ULIP a Complex Financial Product?

What is the Death Claim Payable in the Case of ULIP?

How Does NPS Work?

Benefits of Early Retirement Planning in India

Difference Between Unit-Linked Insurance Plans and Non-Linked Plans

Retirement planning with a systematic life insurance plan

How has ULIP Grown Over the Last 3 years?

Retirement Planning - How To Calculate Your Retirement Premium in India?

Long Term Investment Guide for Your Retirement

Why Should I Invest in ULIP?

Do Pension Plans Allow any Death Benefits?

A Quick Guide to Retirement Plans

Give Your Retirement Savings A Booster-Shot with Annuities

What are the Benefits of ULIP - Explained

ULIPs or Pension Plans – Which is a Better Retirement Plan?

Top 6 Reasons Why You Should Get A Pension Plan

Does Having Both ULIP Plan and Other Health Insurance Plan Make Sense?

How Safe is it to Invest in ULIP plans?

What are the Maturity Benefits in a ULIP Plan: Fund Value Sum Assured or Only Fund Value?

How Can I Achieve My Wealth Goal with ULIP Investment?

How is ULIP NAV calculated? How is the return calculated in ULIP?

Benefits of Early Retirement Plans

Best Insurance Plans for a Guaranteed Monthly Income After Retirement!

What is the Estimated Return Percentage on ULIP? Do Investors Get Compound Interest?

What is Lock-In Period in ULIPs?

Top Investment Options for Retirement Planning

What are the Instruments Available for Building a Retirement Corpus?

Top 4 Mistakes To Avoid While Planning For Your Retirement

10 Steps to Figure Out How Much Money You Will Need For Your Post Retirement Plans

Retirement Planning Guide for Working Men and Women

Worried About Running Out of Money in Retirement? 4 Tips to Avoid This Crisis

Advantages of Pension Schemes and Retirement Plans

Why Should You Invest in NPS?

Why Are ULIPs Called Flexible Investments?

Why are ULIPs One of the Best Tax Saving Instruments?

What are the things to consider before buying ULIPs?

Retirement Planning at 50? You Are Still Good to Go

The Significance of Number 8,000 in Retirement Planning

Un-Retirement - Are You Ready For It?

What tax benefits are there on saving for retirement?

Pros and Cons of Retirement Annuities

What are the Advantages and Disadvantages of ULIP?

Tips to invest your voluntary retirement scheme money

Why Should Retirement Planning Be on Top of Your Priority List?

How can NPS help you save tax?

What Are Superannuation Benefits?

Why ULIP Should Be a Part of Your Investment Portfolio?

A Beginner's Guide to Understanding 401k Retirement Plan

5 Retirement Planning Tips for a Financially Controlled Post-Employment Life

5 Common ULIP Myths That You Should Stop Believing

How Do Annuity Options Work In NPS

Do ULIPs Give Good Returns On Investments?

Is ULIP Better Than FD?

10 Steps to Figure Out How Much Money You Will Need After You Retire

How Has NPS Performed in Comparison with Other Instruments?

Retirement Planning for Millennials

What are the Rules for Exit From NPS?

Benefits Of Retirement & How Investments Can Help You Enjoy Them

ULIP: Can You Surrender ULIPs or Withdraw Money from It?

5 Notable Investment Options for Retirees

Are Annuities Great For Early Retirement?

How To Calculate The Present Value And Future Value Of Annuities?

How To Make Most of Your Money After Retirement?

What is Fund Value in ULIP?

Is It Worth Buying ULIP Plans For 10 Years?

How Does Pension Plans in India Works?

Is ULIP A Good Investment Option?

Why You Should Invest In An Annuity Plan?

What are the Differences Between ELSS ULIP and Mutual Funds?

5 Reasons Why ULIP Plans are One of The Best Retirement Planning Instruments

Top 6 Flexible Benefits That ULIPs Offer

What is the Difference Between EPF, VPF, and PPF? What are Their Tax Benefits?

Retirement Planning Guide: These 5 Steps Will Help You Towards a Safe, Secure and Fun Retirement

Inflation: A Key Factor to Consider into Retirement Planning

Terminologies You Should Understand About Retirement Plans

How To Choose The Right Pension Plan?

What are the minimum and maximum investment in ULIP? Would the Whole Amount Insured in The ULIP Insurance be Invested in the Market?

What Happens to ULIP Premiums Paid if the Market Crashes?

Meaning of Sum Assured in a ULIP

How Is ULIP Different from Other Life Insurance Plans? Where Can I Invest - ELSS, ULIP, or PPF?

What is a Retirement Plan - What are its Features?

यूलिप के फायदे (Benefits of ULIP in Hindi)

ULIP Plan or Traditional Insurance Plans - Which is better?

Annuity Plan | How to Choose the Right Annuity Plan | Kotak Life

Invest for your second innings with a guaranteed savings plan

Important Questions To Ask Yourself Before Choosing A Good Retirement Plan

Know Why You Should Stay Invested in Your ULIP Plan

What is Partial Withdrawal in ULIPs?

Ten Signs That You're Ready to Retire

How Quickly is Fund Switch Effected in ULIPs? Is it Done the Same Day or After a Particular Number of Days?

Demystifying the Retirement Planning Process

Is it Advisable to Withdraw the ULIP Insurance Policy After 5 Years?

ULIP Tax Benefits: यहां निवेश करने पर मिलते हैं 5 बड़े फायदे

Calculating a Retirement Corpus that can Support Your Lifestyle

NPS for Housewife

5 Reasons to Buy ULIP for a Secured Financial Future

7 Secrets that can Make Your Post-Retirement Phase Prosperous

What are the Uses of ULIP?

यूलिप के 8 शुल्क

Can I Surrender My ULIP Policy after 2 Years?

Why Should You start Retirement Planning as soon as you start a job?

Looking for Ways to Earn Lifetime Income in Retirement? Here Are 6 of the Top Options

How to Build a Tax-Free Pension Income for Retirement?

How Can ULIPs Help You Plan for Your Child's Future?

What To Do With Your Retirement Accounts During An Employment Lapse?

Which are the Best ULIP Plans in India for Children?

What is an Annuity Plan and How Does Annuity Plan Works | Kotak Life

Different Types of Retirement Schemes

Here's What Retirement Would Look Like 30 Years From Now

Getting Close to Retirement? Six Key Retirement Planning Tips That Can Help You Retire

What are the Chances of Losing all my Money in ULIP and How Much Return Should I Expect?

What Are Mortality Charges In ULIP?

6 Signs That You Are Not Financially Ready For An Early Retirement

How to Choose the Best ULIP Plans to Invest in 2022?

FAQs on Taxation of ULIPs

How Does ULIP Work in India?

Managing Your Retirement Income with an insured retirement plan

Different Types of ULIP Investments in India

Top 4 Myths About ULIP Investments You Should Know

Types of Pension Plans for Your Retirement

At What Age Should You Start Your Retirement Planning?

What is ULIP and Its Benefits?

What Are Retirement Pension Plans?

Which Is Better: ULIP or SIP?

What Happens If I Stop Paying My ULIP Policy Premium After Paying the First Premium? Will I Still Get The Return?

What are the Charges Levied on ULIP?