US Tax implication Indian LIC receipt

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Subbu
Posts: 26
Joined: Sun Feb 04, 2007 5:37 pm

US Tax implication Indian LIC receipt

Post by Subbu »

I have recently received the final payment of my 15 years cash back LIC policy. What is the US tax implication of this payment? I am confused! Any help will be much appreciated.
kaytown
Posts: 1
Joined: Mon Feb 12, 2007 7:50 am

US Tax implication Indian LIC receipt

Post by kaytown »

Hello,

If I pay the premium of LIC Plan through NRE Account every year and at the end matured time, I am aware that funds can be repatriated. My Question is, Are those funds are tax free in USA or should we pay taxes?

Thanks
Desi
Posts: 11421
Joined: Tue Dec 19, 2006 9:12 pm

US Tax implication Indian LIC receipt

Post by Desi »

Life insurance policy has matured!!! - Think about it, how is this life insurance? It is an investment that has matured under the cloak of life insurance. Life insurance is nothing more other than a guarantee of certain sum on death for payment of annual premiums -so there should be no concept of maturity here.

But, insurance companies, create all these packaged products and people fall for them.

Any time, there is a cash surrender value received from life insurance, any excess amount above and beyond premiums paid is considered ordinary taxable income.

In case of foreign Life Insurance policy, there is a requirement to pay 1% of premium amount as excise tax every year as you pay premium. This is reportable on form 720 (read instructions for details).

Whether the ordinary income proceeds of foreign life insurance are to be treated as PFIC, I am not sure, but have not seen such references.

In addition, the cash surrender value of foreign life, is also generally to be reported to treasury under the form TD.F 90.

The above are all the complications of a foreign life insurance.

However, I would consider reporting the gain as ordinary income.
RRK
Posts: 2833
Joined: Sat Dec 16, 2006 4:37 am

US Tax implication Indian LIC receipt

Post by RRK »

OP,
I am not surw why you chose to post this thread under Bangalore REIG.
This subject is to be discussed under Finance >> Taxes.
I am moving this thread to correct forum.

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