In the Union Budget of 2025, the taxation of Unit Linked Insurance Policies (ULIPs) changed significantly. Let’s look at these changes in a simple way.
What Are ULIPs?
ULIPs are insurance products that combine investment and life insurance. A portion of the premium you pay provides life insurance coverage, while the rest is invested in market-linked assets like stocks or bonds.
Budget 2025 – Taxation of Unit Linked Insurance Policies (ULIP)
Previous Taxation Rules for ULIPs
Before the 2025 Budget, the tax exemption on the maturity proceeds of ULIPs was governed by Section 10(10D) of the Income Tax Act, 1961. The exemptions depended on certain conditions:
- Policies Issued Between April 1, 2003, and March 31, 2012: The annual premium should not exceed 20% of the sum assured.
- Policies Issued On or After April 1, 2012: The annual premium should not exceed 10% of the sum assured.
- Policies Issued After February 1, 2021: If the total annual…