Tax exemption on maturity proceeds of ULIPs or the unit linked insurance plans offering components of both life insurance and investment, in debt and equity, will be available only if the annual premium paid is upto ₹2.5 lakh.
The Budget proposal will apply to ULIPs purchased on or after February 1. However, the amount received on death, by nominee, will continue to remain exempt without any limit on the annual premium.
“For annual premium above ₹2.5 lakh for ULIPs, the maturity benefit will now be taxed as Capital Gains. Thus, the budget endeavours to selectively bring in taxation parity between life insurance companies and mutual funds,” said Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance Company.
Under existing provisions of the Income Tax Act, there is no cap on the amount of annual premium paid by any person during the term of the policy. Stating this, the Budget documents said, “Instances have come to the notice where high networth individuals are claiming…