📌 Overview
Unit Linked Insurance Plans (ULIPs) combine life insurance + market-linked investment. Budget 2025 has clarified taxation, dividing ULIPs into Tax-Free and Taxable categories.
✅ Tax-Free ULIPs (Exempt u/s 10(10D))
Maturity proceeds remain fully exempt, if conditions below are satisfied:
1️⃣ Policies issued from 01-04-2003 to 31-03-2012
• Premium ≤ 20% of Sum Assured
2️⃣ Policies issued from 01-04-2012 to 31-01-2021
• Premium ≤ 10% of Sum Assured
3️⃣ Policies issued on or after 01-02-2021
Must satisfy BOTH:
• Premium ≤ 10% of Sum Assured
• Premium ≤ ₹2.5 lakh per year
📍 If these limits are met → Entire maturity amount is tax-free
❌ Taxable ULIPs (Now treated like Mutual Funds)
If above conditions are not met → ULIP becomes Taxable Capital Asset
Tax treatment:
📈 Equity ULIPs (Equity ≥ 65%)
• LTCG (>12 months):
→ 12.5% tax (above ₹1 lakh exemption)
• STCG (≤12 months):
→ 20% tax
📉 Debt ULIPs (Equity < 65%)
• STCG → Taxed as per slab
• LTCG → 20% with indexation
🎯 Practical Impact
✔ Old compliant ULIPs → Still tax-free
✔ High premium ULIPs → Now taxable
✔ ULIPs and Mutual Funds → Similar tax treatment
🏁 Conclusion
Budget 2025 has removed blanket tax exemption and made high-premium ULIPs taxable, improving fairness and aligning them with other investment products.
CA RAMAKRISHNA SANJAY
+91 7760252581
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