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Dec 22, 2025
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Reporting ULIP payout of Rs 3.22 crore under wrong head in ITR triggers tax penalty; ITAT Hyderabad cancels penalty
When Mr. Rao surrendered his three unit-linked insurance policies (ULIP's), which he had bought from Bajaj Allianz Life Insurance 14 years ago for Rs 75 lakh, he ended up with net long term capital gains of Rs 3.22 crore. However, Rao made a mistake in his income tax return (ITR). He incorrectly categorized this Rs 3.22 crore LTCG from ULIP surrender under as capital gains income instead of income from other sources.
As a result, the tax department issued him a notice, and eventually, the tax officer slapped a penalty of Rs 2.48 crore on him.
Rao decided to contest this, first in CIT (A) and later in the Income Tax Appellate tribunal (ITAT) Hyderabad. On November 19, 2025, he won the case in ITAT Hyderabad. Advocate H Srinivasulu represented him.
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