Tax treatment on Partial Withdrawal

[Rahul Bagaria]

Partial withdrawal is a feature/flexibility, offered under ULIPs where in the policyholder can actually withdraw some amount from the policy during the policy term, for his emergency needs or any other need. The policy continues with all the benefits intact. Would like to know: If the withdrawal is done within first 5 policy years, will the amount withdrawn would be taxable or tax free? If the withdrawal is done after first 5 policy years, will the amount withdrawn would be taxable or tax free?

[Surender Gupta]

That amount shall remain exempt. There is nothing in section 10(10D) to restrict such withdrawal within 5 years. 

[CAGOPALJI AGRAWAL]

Rahulji, the withdrawals would not be taxable as there is not termination of the plan in terms of the provisions of section 80C(5)(ii).

[DEV KUMAR KOTHARI]

One should not  expect a full fledged , correct answer, unless all relevant facts are given in the query.
As very usual, Mr. Bagaria, has again  given incomplete information which cannot be answered and even brain stormed in discussion forum.
We cannot contemplate several possible facts to answer a query.  

AI Summary

Partial withdrawal tax exemption for ULIPs continues unless withdrawal causes plan termination under applicable provisions. Partial withdrawals from Unit Linked Insurance Policies (ULIPs) are not treated as taxable where the policy remains in force; there is nothing in section 10(10D) expressly limiting exemption for withdrawals within the first five years, and withdrawals that do not constitute plan termination fall outside the termination disallowance in section 80C(5)(ii), but precise treatment depends on complete factual details.