 POST VACANCIES

|
JOB OPENINGS Login Sign up    

SUBSCRIBE NEWSLETTER

YOUR EMAIL GO

 NEWS MY RESEARCH DESK CLIENT MANAGEMENT KNOWLEDGE Success Stories MF Facts & Figures CafeAlt RESOURCES

Insurance 
A 2-minute guide on new ULIP taxation rules

A 2-minute guide on new ULIP taxation rules

Proceeds from ULIP plans with over Rs.2.50 lakh yearly premium are now
subject to capital gains tax. But what happens when an investor has bought
more than one plan? Here is a guide.

Abhishek Kumar Feb 5, 2022

  

The proceeds from ULIPs, which used to be completely tax free, were made taxable from
February 1, 2021. The income tax department has now come out with details as to how the
taxation will take place when an investor holds multiple ULIPs.
POLL MORE POLLS
How are ULIPs taxed?
With debt funds delivering
less than FD returns, what
On February 1, 2021, the government withdrew tax exemptions given to ULIP investors in cases are you recommending to
where the yearly premium exceeds Rs. 2.5 lakh. This means that proceeds from any ULIP clients:
investment started on or after February 1, 2021 with annual premium of over Rs. 2.5 lakh will

I continue to recommend debt
face capital gains tax.
funds as it is more tax efficient
What happens when an investor has multiple ULIP investments?
I think bank FDs is better
considering the current market yield
To determine the maximum exemption an investor can claim, one needs to first divide the
policies into two sections — old (policies bought before February 2021), a combination of old
I recommend corporate FDs and
and new policies (policies that bought before and after February 2021) and new (policies bought hybrid funds instead of debt funds
after February 2021).

Since the new rules came into force from February 1, 2021, all policies bought before this date
are exempt from paying any capital gains tax. EVENTS FORUMS
Coming to other scenarios, investors have the option to claim one exemption (for either just one
policy or on an aggregate basis).

Let's understand the above condition with an example.

Suppose, an investor had bought an ULIP plan on January 2020 and he buys 3 other plans on
March 1, 2021. The details are given in the below table:

Here, investors can claim two exemptions, first being policy X as it was bought before February
2021.

The second exemption can be sought for a combination of policy A and B as their aggregate
premium is not more than Rs. 2.5 lakh.

So, at the end the investor will have to pay taxes only on the proceeds received from policy C.

Here's another example for further clarity:

 In this example, since all the policies were bought after February 1, 2021, the investor will have
to combine two or more policies in such a way that the exemption benefit is highest.

In this case, investors can choose to claim exemption on either X+B or A+B as the aggregate
yearly premium of both the combinations is Rs. 2.5 lakh, which is the upper threshold of
claiming exemptions.

Have a query or a doubt?

Need a clarification or more information on an issue?

Cafemutual welcomes all mutual fund and insurance related questions. So write in to us at newsdesk@cafemutual.com

Latest Articles  
What does the new provision for Budget 2022: Govt. increases TDS India has one individual agent for
differently abled persons in on insurance commission to 5% every 550 people
insurance mean? Read More Read More
Read More

Click to clap

Disclaimer:
Cafemutual is an industry platform of mutual fund professionals. Our visitors are requested to maintain the
decorum of the platform when expressing their thoughts and commenting on articles. Viewers are advised to refrain from