I have invested SIP of 2000 p.m in UTI ULIP since March 2013 with 15yrs duration. I did so on insistance on my father’s friend who I realised later is a UTI agent. I never invested before and understanding the need of future savings I enrolled in the scheme.
Naturally, now I see little logic in remaining invested in ULIP. I want to exit but confused which way. I need to understand since I have been paying premium for 3 years continuosly, can I stop paying future premiums by instrucing banks and not surrender and let it complete 15 yrs term without any further contribution. Or contact UTI itself to convert it to paid up policy without any further contribution, if this is possible.
Or shall I surrender it altogether. My only doubt is other than 2% exit load, will I be liable to pay any tax on tax benifits I availed in past years or just income tax after indexation benifits on gains accured?
UTI website is silent on taxation part on premature surrender, other than 2% exit load it says nothing.
Thanks and Regards,
Rohit-How is the fund performing? If it is consistently not performing well, then better to surrender (even with 2% penalty). Tax benefit you took under Sec.80C will be reversed if you surrender the policy before 5 years. Considering all these factors (2% penalty and tax reversal), I suggest you to continue for another 2 years. Let it complete 5 years. Then surrender.
Thanks for your response.
It is giving me a 8% CAGR return which fluctuates 1% everyday since contribution timeline is short and market is volatile right now. I think we both are on common ground that Its better to surrender this once 5 yrs are completed and divert to PPF or ELSS or other equity based MF with long term horizon.
If I surrender after 5yrs will I be taxed on gains only with indexation benefit(since its a debt fund) or whole amount will be taxed, if you have any idea.
Another point I am considering seriously is, continue investing till 5yrs completed and then stop the monthly ECS and remain invested without any further contribution or surrender and withdrawn once 15yrs completed.