Close
Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak e-Term

Protect Your family’s financial future with Kotak e-Term. Know more

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family. Know more

Kotak Guaranteed Savings Plan

A plan that offers long term savings and insurance in one premium. Know more

Kotak e-Invest

Insurance and investment in one plan with Kotak e-Invest. Know more

Kotak Lifetime Income Plan

Retirement years are the golden years of life. Know more

Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Understanding Tax Exemptions in ULIP (Old and New)

ULIPs are now one of the leading instruments in India. But what are the ULIP tax exemptions under the new rules? Find out here.

  • Apr 29, 2022
  • 4,611 Views

ULIPs are a very popular type of investment. In a ULIP plan, the policyholder pays a certain amount, called a premium, from which a portion is assigned to various fund possibilities, and the advantages of the investment are realised. When purchasing ULIP, an individual does not need to acquire a separate life insurance policy because it is incorporated into the plan

    Key takeaways

    The funds you choose and the quantity you choose will determine the taxes you will pay on your ULIP returns.

    a. Your funds will be taxed as equity mutual funds if the equity portion exceeds 65%.

    b. For indirect equity investments, such as those made through ETFs, the equity must be at least 90% to be taxed as an equity mutual fund.

    b. Investments in equity funds are exempt from long-term capital gains (LTCG) up to ₹1 lakh. Taxes will be charged on any sum in excess of that.

With many individuals flocking to this financial investing instrument, ULIP has carved out a niche in the investment market thanks to its dependability, extensive benefits, and capacity to generate considerable financial rewards. ULIP tax exemption is also one of the reasons they’ve become so well-known. However, certain modifications in structure for the ULIP tax exemption may create confusion among potential and present investors..

This article will take you through all the previous and new ULIP income tax exemptions to help you understand this tool better.

All About Old and New Unit Linked Insurance Plan (ULIP) Plan Tax Exemption

Old Unit Linked Insurance Plan (ULIP) Plan Tax Exemption

On January 19, 2022, the Central Board of Direct Taxes (CBDT) released a statement outlining the mechanism for determining whether ULIPs are tax-exempt. If the yearly premium for ULIPs topped ₹2.5 lakh, the ULIP tax-exempt status would be removed, according to Budget 2021. Nevertheless, there were many questions about how the framework would operate, particularly in the situation of multiple ULIPs, which include both types purchased before and after the budget plans.

The Central Board of Direct Taxes (CBDT) stated on January 19, 2022, the process for evaluating whether ULIPs are tax-exempt. According to the current CBDT announcement, the total premium of both new and old ULIPs would be evaluated for ULIP tax exemption. If the total surpasses ₹2.5 lakh, the exemption will not apply to new ULIPs with premiums over ₹2.5 lakh.

The return or income on the maturity of ULIPs with annual premiums above ₹2.5 lakh shall be assessed as capital appreciation and levied accordingly under section 112A. However, the cap of ₹2.5 lakh on the annual premium of ULIPs would apply only to plans bought on or after February 1, 2021.

New Unit Linked Insurance Plan (ULIP) Plan Tax Exemption

The new government ULIP taxation law will only apply to future new ULIPs as ULIP income tax exemption, so you won’t have to worry about your current ULIPs, where you may continue to invest your premium until the policy matures. On the other hand, purchasing numerous policies will not assist with new ULIPs.

Here are some of the new ULIP taxation rules of ULIP from February 2021 onwards.

ULIP returns can be taxable

Return on ULIP was not taxable if the annual investment did not exceed 10% of the life cover in the plan. If you have started two ULIPs after Feb 2021 and the annual premium exceeds ₹2.5 lakh, then the ULIPs will be taxable.

Restrictions on fund switch

As there is a feature to switch between ULIPs in most of the plans. While earlier, the switch was free, as per the new rule, the switch is now taxable.

Less than 3 years - chargeable as per the slab rate

More than 3 years - Chargeable at 20%

ULIP Exemption Changes and Their Popularity

ULIPs remain an appealing investment choice, notwithstanding the increased tax rules. To begin with, ULIPs combine the protection of life insurance, with the potential for larger investment returns. This ensures your family’s safety while also providing the best long-term returns. Furthermore, on premiums up to ₹1.5 lakhs, ULIPs continue to be tax-free. Moreover, the death benefit is still tax-free under Section 10 (10D) of the Internal Revenue Code.

Finally, unlike the intricate equity-linked market investing choices, ULIP plans are simple to grasp. As an investor, you’ll have a simple and painless time matching your fund allocation to your risk tolerance and financial objectives.

Conclusion

ULIPs are a popular choice among individuals, regardless of the previous and new ULIP tax exemptions. However, before you get your hands on this plan, ensure it’s compatible with your budget and personal goals.

Download Brochure

Features

  • Increasing Life Cover*
  • Guaranteed^ Maturity Benefits
  • Enhanced Protection Through Riders
  • Tax Benefits
  • Dual Benefits: Guaranteed^Maturity + Death benefits

Ref. No. KLI/22-23/E-BB/999

T&C

Download Brochure

Features

  • Enhanced Protection Through Riders
  • Life Cover
  • Tax Savings
  • Multiple Premium Payment Terms
  • Guaranteed @ Loyalty Addion
  • Accrued Guaranteed @ Additions

Ref. No. KLI/22-23/E-BB/490

T&C

- A Consumer Education Initiative series by Kotak Life

Similar Articles

How Much Money This Budget 2019 Can Help You Save

Tax Rate Chart for FY 2022-2023: What is TDS Slab?

Guaranteed Return Plans-Why is it a must for you?

Investment Proofs You Need Submit To Lower TDS Cut From Your Salary

What is Tax Deduction at Source (TDS)?

All You Need To Know About Assured Savings Plan

Insurance and Endowment: Everything You Need to Know!

What is Form 26AS - All You Need To Know

Difference Between Guaranteed Savings Plan and Guaranteed Income Plan

Difference Between Guaranteed and Assured Returns

Invest in Tax-Free Bonds: Understanding the Benefits and Who can Invest?

Saving Income tax in 2017 - 18

Impact of GST on Life Insurance in India

Tax-Free Income in India

Understand ITR4 Form: How to Fill, Structure & Determine Your Eligibility

How to Calculate returns on an assured savings plan?

Income Tax Filing Using Multiple Form 16

9 Income Tax Myths That Could Cost You Money while Filing returns

5 Popular Tax-Saving Schemes in India

Financial Planning and Best investment options for Housewives

इनकम टैक्स रिटर्न कैसे फाइल करें?

Tips to plan your savings in 2022

What is Section 80C - Explained in Detail

Tax Saving for Self Employed in India

What is TDS Slab?

What is the difference between TDS and TCS?

sections Under Section 80C of the Income Tax Act, 1961

Maximize Your Savings: Tax Tips for Salaries Above ₹20 Lakhs

How to Check Income Tax Refund Status Online in India

आयकर स्लैब 2021-2022

Investing Lump Sum Amount

Tax Saving Options for Salaried Employees

LTC Cash Voucher Scheme October 2020 – Everything You Need to Know

Union Budget 2023: Impact on Life Insurance

Income Tax Deductions & Exemptions under Sections 80C, 80D & 80DDB for FY 2021-22 & 2022-23

52 Weeks Savings Plan: Daily Savings Plans for a Better Tomorrow

How to Boost Your Savings with Guaranteed Results

What is capital gains tax, and how it works?

Should you prefer a Guaranteed Savings plan over monthly income schemes?

Budget 2019: Impact on the Common Man in India

Tax-Savings Investments and Options in India

What is Section 10D of the Income Tax Act?

What is Form 16B?

8 Things to Help You Select a Savings Investment plan

E-Filing of Income Tax Returns in India

Difference between Section 80C and 80CCC of the Income Tax Act, 1961

How Inflation Affects Savings and Investment?

Have You Considered Term Insurance a Part of Your Tax Planning?

All You Need to Know About Section 80C

Are Financial Planning and Tax Planning the Same Thing?

How to E-Verify ITR: A Step-by-Step Guide to Electronically Verify your Income Tax Return

What To Do If Your TDS Is Not Deposited With The Government?

What is TDS (Tax Collected at Source)? A comprehensive guide

Challan 280 - How to Use Challan 280 to Pay Income Tax

Key Changes of the Union Budget 2023 You Must Know

What is EEE in income tax? 5 tax-free investment options to become crorepat

A Guide to Life Insurance Policy’s Tax Benefits and Taxability

Saving Plans to Give Children a Debt-free College Education

How to Check Income Tax Refund Status Online in India

What is the Difference between Form 16 and Form 16A?

सुकन्या समृद्धि योजना (SSY) के कर लाभ क्या हैं?

12 Tax Changes in Budget 2022 that May Impact Your Personal Financial Planning

All you need to know About Tax on Inheritance

Easy ways to make personal savings plans

Tax Deductions You MUST Know

Income Tax Calculator: How Life Insurance Policies are Taxed? Explained

Section 80E: Tax Exemption on Interest on Education Loan

Section 80G of the Income Tax Act

हाउस रेंट अलाउंस क्या है और इसके छूट की गणना कैसे की जाती है?

How to File Income Tax Return - Everything You Need to Know

Plan your Daughter's Wedding With Best Monthly Savings Plan

Why Tax Planning Should Be an All-year Round Activity

Importance of Savings Plan You Need to Know

Top 8 Tax-Saving Methods in India- Budget Planning

How to File Form 10E for Tax Relief on Salary Arrears?

What is ITR 5 Form and How to File ITR 5?

Tax Benefits of ULIP Plans Available for NRIs

Section 80C Deductions as per Income Tax Act, 1961

Do Beneficiaries Pay Taxes on Life Insurance?

Types of Riders in Insurance Policy

What is Salary Protection Insurance and Why You Need It

How to create wealth through a savings plan?

What is Section 80CCC of the Income Tax Act 1961

What is ITR & How to File Income Tax Return?

Should one prefer a guaranteed savings plan over monthly income schemes?

What is HRA (House Rent Allowance) and How is HRA Exemption Calculated?

What is the Difference between Assessment Year (AY) and Financial Year (FY)?

Income Tax Filing For NRI in India

Tax Saving Guide for 2019-20

धारा 80सी आयकर अधिनियम, 1961

Tax Planning and Tax Benefits of Life Insurance

Tax Saving Tips: Best Ways to Save Income Tax for 2021

How To Save Tax Using Life Insurance?

Types of Income Tax Return (ITR) Forms

What is TDS Exemption Limit?

Save Income Tax by 31st March: Here Is a Checklist

Received an Income Tax Notice? Your Guide to Understanding Intimations under Section 143 (1)

How to File TDS Return?

Income Tax Exemption for Disabled

How to create a savings plan and make good investment choices

What Investment Options Come with Tax Incentives?

TDS rules on the sale of jointly owned property

Everything You Need to Know About Tax Benefits of National Pension Scheme (NPS)

All about TDS on Salary under Section 192 – Kotak Life

Difference between Section 80C, 80CCC, 80CCD & 80D

How to View 26AS and Download Form 26AS Online

What is Section 80C Deduction Limit?

Income Tax Deduction Under Section 80CCC In India

How To Invest In Guaranteed Return Plans For Higher Returns And Financial Security?

Basics of Guaranteed Savings Plan

What is the TDS Rate on Salary?

9 Unusual Investments you Didn't Know for Saving Taxes in India

Section 10 (10d) of Income Tax Act, 1961 on Payouts of Life Insurance Policy

What is TDS Refund Process?

How to e file ITR on Income Tax Government Portal

List of Important Income Tax FAQs

Post Office Savings Scheme - All You Need to Know

Complete Savings Plan for Low Income Earners

How to Get Form 16?

Income Tax Exemption for Physically Handicapped Dependent

How to File Form 16 for Salaried Employees?

How can I get Form 16B from traces?

Tax Structure in India

What are the Different Types of Taxes in India?

How to File Income Tax Return for First Time Tax Payers

Tax Season is Coming- Know How to Save Tax

Financial Benefits and Government Schemes Every Woman in India Should Know

स्रोत पर कर कटौती (टीडीएस) क्या है?

प्रत्यक्ष कर और अप्रत्यक्ष कर में क्या अंतर है?

Guide for Tax Calculation on your Salary

Section 44AD of Income Tax Act for AY 2021-22

Tax Planning Tips for a Newly Married Couple

How to File Income Tax Return without Form 16

What is Tax Evasion, and What are the Penalties for Tax Evasion in India?

What Is Advance Tax and How Is It Calculated?

Income Tax Effects on Salary Deductions in the Union Budget 2023

Income Tax Deductions Under Section 80C

How can NRIs prevent double taxation in India?

All about TDS Payment Online & Due Dates

Who Should Invest In Savings Plan

Penalty For Late Filing TDS Return

A Complete Guide for Filing ITR 3 Form

Form 16, Form 16A, and Form 16B?

How to save tax for salaried person?

ITR 1: Sahaj Form

Why is Form 16 Important?

आयकर रिटर्न (आईटीआर) फॉर्म के प्रकार

Is PF Withdrawal Taxable for NRI?

Section 80D - Medical and Health Insurance Tax Benefits Under Section 80D

Tax Exemption and Scope of Coverage

How Should I Allocate A Monthly Savings Plan For Long-Term Benefits?

3 Tips to Buy Guaranteed Savings Plan

Presumptive Taxation for Business and Profession

What is an Endowment Plan?

Interest Imposed Under Sections 234A, 234B and 234C

How to Pay Advance Tax Online in India

How to Download Form 16?

Income Tax Slabs and Rates in India for FY 2021-22/AY 2022-23

A Comprehensive Guide to Understand the ITR 7 Form

What are Deferred Savings Plans?

What is Rule 132 of Income Tax? How Does it Affect You?

How to file Form 16 online?

Union Budget 2023 and Tax Exemptions on Life Insurance Premium Over ₹5 Lakhs

Best Savings plan for the middle class in India

Problems People Face with Tax Returns after a Job Change

How to Save Tax on Salary Arrears?

ITR-6: Guide to filing ITR-6 Form online

Things to Do After Filing Income Tax Returns

What is a savings plan?

How to Save Income Tax with Insurance

What are Direct Taxes? How to Avoid being Overtaxed?

Money Saving Tips for Single Women

Tax Saving Options other than Section 80C

How to Check Income Tax Returns Status Onine?

Why PAN Card is Essential for Income Tax Filing?

What is Section 80C Deduction?

Income Tax Benefits for Doctors

How much gold can you keep at home? Limits and income tax rules explained

Home Investment Plan to Buy Dream Home

Why January Is an Important Month for Saving Tax?

Personal Finance - Meaning, Importance, and Tips for Personal Finance

Highlights of the Union Budget 2023-24

Income Tax Deductions for Disabled Persons Under Section 80U

Difference Between Gross Income & Total Income in Calculating Income Tax

What is Form 16A?

What is better - Guaranteed Savings Plan or Fixed Deposit?

How to File ITR Online

What is the Maximum Maturity Benefit in Assured Savings Plans?

धारा 80डी आयकर अधिनियम, 1961

Tax Benefits for Startups in India

How Do Assured Savings Plans Work and Why You Should Consider One?

Section 16 of the Income Tax Act (ITA), 1961

What is Section 195 of the Income Tax Act? TDS on Non-Residents of India

How to Claim a Tax Refund?

When Should TDS be Deducted and Who is Liable to Deduct it?

ITR 2 Form – Complete Guide

What is the Last ITR Filing Date and Penalty for Late Filing of ITR?

What is indirect tax and its types?

Personal Finance - How to Deal with Emergencies When Preparing Finances

TDS Due Dates of FY 2022-23 For Return Filing

How to View 26AS and Download Form 26AS Online?

What is the Percentage of Tax Deducted at Source (TDS)?

What is the Difference Direct Tax and Indirect Tax

How To Save Tax Better with 80C

Tax Benefit of Investing in Term Plan

भारत में महिलाओं के लिए सरकारी योजना

प्रधानमंत्री सुरक्षा बीमा योजना