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.

Are Gains from ULIP Sale Taxable?

Sale of ULIP units is non-taxable if the return earned on ULIP investments with an annual premium of more than ₹2.5 lakh.

  • Apr 29, 2022
  • 3,990 Views

A ULIP investment is one of the most popular financial instruments, offering excellent returns on investment and a slew of other appealing features.

ULIPs include “ULIP taxation benefits,” which are a crucial component in attracting a large number of investors, in addition to huge returns.

In this article, we’ll go over the fundamentals of ULIP plans and all about ULIP taxation.

Basics of a ULIP Plan

A Unit Linked Insurance Plan (ULIP) includes insurance and investing in one package. The purpose of ULIPs is to cater to wealth creation and life insurance, with the insurance company investing a portion of your money in life insurance and the balance in a fund that is based on debt, equity or both and meets your long-term aims. These objectives might include retirement preparation, children’s education fee, or any significant event for which you want to save.

Fundamentals of Unit Linked Insurance Plan (ULIP) Taxation

Returns from unit-linked insurance plans appear to be more appealing now that the LTCG charge on equity investments has been announced. ULIP’s investing component functions similar to a mutual fund but has a distinct fee structure. Several income-tax laws govern it. Because ULIPs have a 5-year lock-in period, revenues from the policy—ULIP maturity taxability or early surrender—are tax-free under Section 10 (10D) of the income-tax act if the sum insured in a life insurance payout is at least ten times the yearly premium. The death benefit, on the other hand, is tax-free. Given the anticipated LTCG tax of 10.4% on equity investments through mutual funds, this is a benefit for ULIPs.

  • Surrender Charge and ULIP taxability

ULIP surrender taxation is rather easy to understand.

If the insurance is surrendered after the 5-year lock-in term, the surrender value is tax-free, and the insured can take advantage of the tax incentive. Once you have completed five years, there will be no surrender fee, and the surrender price will be tax-free. If you surrender your ULIP before five years, the surrender value is added to your income and taxed at the applicable slab rate.

  • ULIP Taxation in Budget 2021

The return earned on ULIP investments with an annual premium of more than ₹2.5 lakh (i.e., high-value premium insurance) would not be tax-deductible, according to ULIP taxable budget 2021. The Central Board of Direct Taxes (CBDT) has released a notification that explains how capital gains on unit-linked insurance plans (ULIPs) would be calculated. The CBDT’s fundamental structure treats all payments the policyholder receives as income, whether they are for withdrawal or as an incentive.

As per ULIP taxation in Budget 2021, the CBDT’s fundamental structure treats all payments the policyholder receives as income, whether they are for withdrawal or an incentive. Therefore, to calculate profits, CBDT recommends deducting the entire premium paid to date from the income received to date to find out the capital gain amount in its circular dated January 19, 2022.

ULIPs offer an appealing variety of benefits, particularly when it comes to ULIP taxation; nevertheless, before investing, thoroughly examine all elements of the plan to make the best choice for yourself and your loved ones.

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

Kotak e-Invest

Download Brochure

Features

  • Return of Mortality Charges*$
  • Enhanced Protection
  • Multiple Plan Options
  • Zero Premium Allocation Charges
  • Tax Savings^

Ref. No. KLI/22-23/E-BB/521

T&C

- A Consumer Education Initiative series by Kotak Life

Similar Articles

8 Important Tips to Maximize Gains with ULIP Investments

Difference Between ULIP and Endowment Plan?

Learn About Safe Investments with High Returns in India

Best Investment Options to Cover Your Child's Education

Why are ULIPs One of the Best Tax Saving Instruments?

Receiving regular payouts at various stages of life

What is a Credit Score and How Can Insurance Help You Improve it?

Factors Affecting Stock Markets

Which are the Best ULIP Plans in India for Children?

Investment Options for NRIs in India

Building wealth through regular investing

Which is a Better Investment - Mutual Funds Or ULIP?

Do You Know the Difference Between Savings and Investment?

Beginner's Guide to Wealth Creation: Meaning, Strategies, & Importance

How Does an Endowment Plan Work?

Why Should I Invest in ULIP?

Why ULIP is Better Investment for Long-Term Wealth Creation?

How to Plan your Investment to Achieve Periodic Financial Goals?

The lesser-known facts about ULIP policy that customers should be aware of?

What are the Maturity Benefits in a ULIP Plan: Fund Value Sum Assured or Only Fund Value?

How to Choose the Best ULIP Plans to Invest in 2022?

Can ULIP Help in Achieving Short-Term Financial Goals?

Are Money Back Policies Helpful? A Complete Guide

Safe Investment Options with High Returns for FY 2018-19

Learn About Safe Investments with High Returns in India

What are Mutual Funds?

How to Start Saving Money in 10 Simple Ways?

Different Types of Endowment Plans

Corporate Bonds: Meaning, Types & Benefits

What is Compound Interest, And How Do I Calculate it?

How Can a Legal Nominee Claim ULIP Benefits are the Policyholder’s Death?

Short Term and Long Term ULIP Plans for Wealth Creation

What's Better for Your Child's Education? Child Plans or Mutual Funds?

Asset Allocations in ULIP - Know the Top Benefits

4 Benefits of ULIP Fund-Switching Feature

What is Fund Switch in ULIP? And ULIP Fund Switching Techniques

ULIPs: Suitable for all

How Is ULIP Different from Other Life Insurance Plans? Where Can I Invest - ELSS, ULIP, or PPF?

Top 10 Investment Strategies to Create Wealth

Why Should You Build an Emergency Fund?

What are Some of the Safest Investment Options in India?

Why Do You Need A ULIP Plan - All You Need To Know

यूलिप के फायदे (Benefits of ULIP in Hindi)

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

ULIP as an Investment for Your Child

What is a Child Money Back Plan, and How Does it Work?

Difference Between Guaranteed Savings Plan and ULIP

Are Investment Returns Guaranteed in a ULIP?

What is the Time Value of Money (TVM)?

What is ULIP and Its Benefits?

ULIPs Investment – A Boon or Bane?

Unit-Linked Life Insurance (ULIPs) vs. Term Insurance

How Can ELSS Funds Help You Save Tax & Create Wealth?

Why Should You Consider Guaranteed Savings Plan for Long-Term Investment?

What are the Best Short-Term Investment Plans with High Returns?

What is SIP Calculator, And How Does it Work?

What is Money Management? Definition & Example

How To Diversify Portfolio In 2023?

A Step-by-Step Guide: How To Make An Investment Plan?

The Importance of Starting Early: Securing Your Child's Future with a Child Education Plan

Best Investment Options in India in 2022

How To Track ULIP Performance?

What Is Financial Planning?

Best One-Time Investment Plans in India

What are Index Funds and How Do They Work

Long Term Savings Plan - Best Savings Investment Plans in India

How is the Compound Annual Growth Rate (CAGR) Calculated in ULIP?

What are Financial Assets & their types?

Creating a second source of income with life insurance

Things to Know Before Buying an Endowment Plan

यूलिप प्लान में परिपक्वता लाभ क्या हैं: फंड वैल्यू सम एश्योर्ड या ओनली फंड वैल्यू?

What are the Best Investment Options For Females?

Which is Better – FD, Mutual Fund, SIP, or ULIP?

Can ULIP Policy be Transferred?

What are the Best Investment Options for Young Adults?

How to Fulfil Your Financial Goals in the Next 10 Years?

यूलिप के फायदे और नुकसान क्या हैं?

What is Equity Mutual Funds: Meaning, Types & Benefits

6 Important Tips to Maximize Your Gains with ULIP Investments

Why Should You Invest in Term Insurance And ULIP?

Rate of Interest on Different Investment Plans in India

Endowment Plan vs Fixed Deposit?

Top 5 Principles That Need to be Followed for Wealth Creation

Is This The Right Time To Invest In ULIP? Why or Why Not?

ULIP Investment Strategy: Top Tips to Improve Your ULIP Gains

What are the Advantages and Disadvantages of ULIP?

Top 10 Investment Plans Available in India

Importance of Portfolio Management

Customising investments to manage your wealth

How to Make Your Financial Portfolio?

How Do One-Time Investment Plans Work?

How to Plan Savings from Salary?

What is ULIP Renewal?

Is the ULIP Policy Surrender Value Taxable?

Best Guaranteed Returns Investment Options to Meet your Financial Goals

ULIP Benefits You Can Avail from Early Investing

Everything You Must Know About ULIP Riders

उच्च रिटर्न प्राप्त करने के लिए सर्वश्रेष्ठ इन्वेस्टमेंट विकल्प

What is Direct Investment and its Types?

ULIP Capital Gain Tax: Check Tax Norms for Capital Gain on ULIPs

Four Financial Lessons from The Vedas on Living Life to The Fullest

Successful Financial Planning for Urban Women

What are the Best Investment Options for Beginners or Amateur Investors in India?

Why Should Parents Invest in Endowment Plan?

ULIP Plan as a Gift

What are the Best Investment Options for Students in India?

What is NAV in ULIP, and How is it calculated?

ULIP NAV Meaning & How is the Return Calculated in ULIP

How to Increase Net Worth Along with Family Protection

Benefits of ULIP as a Child Insurance Plan

Why Are ULIPs Called Flexible Investments?

What is the Importance of Saving Money?

How Much Wealth Can You Create from ULIP in 10 years?

How to Use Recurring Investment Strategies to Build Wealth?

Debt ULIPs vs. Debt Mutual Funds: What's the Difference?

What is a Savings Plan and What are is Benefits?

How to Manage Your Portfolio Like a Professional?

What is ULIP Plan, and How Does it Work?

Difference Between Passive and Active Investing

Investments Options to Buy a house in India

Best Investment Plans for Children - Secure Your Child's Future

Got a Salary Hike? Here’s How to Plan your investment further

Savings Plan for Grandchildren

Here's Why it's a Good Time to Explore ULIPs as an Investment

8 Charges in ULIP That You Must Know

Does Rupee Cost Averaging Work In Unit-Linked Insurance Plans?

Planning for Your Child's Higher Education? Explore These Investment Options

वित्तीय संपत्तियां और उनके प्रकार

How to Plan Your Child's Education - A Step-by-Step Guide

How to Cancel ULIP Policy?

How to Manage Inheritance Money?

Early Investing and the Power of Compounding

What are Tax-Deferred Savings Plans?

How To Invest Money In ULIP?

ULIP vs FD - Which is Better and Why?

Top 5 Investment Options in 2022 for Healthy Returns

Which are the Best Investment Plans for Indian Senior Citizens in 2022?

Why is Portfolio Diversification Important? How to Diversify Your Portfolio?

लॉयल्टी एडिशन क्या हैं, और वह यूलिप में कैसे काम करते हैं?

Planning Financial Goals and Objectives of Financial Planning

What are loyalty additions, and how do they work in a ULIP?

Important Questions You Must Ask Yourself When Buying a ULIP Plan

How to Calculate Your ULIP Returns?