There is a breakdown of changes and their implications here.
Tax Treatment of Ulips – What has changed?
The new provisions states that if one does not meet the terms of exemption under ULIP Section 10 (10D), it will be considered as a capital property.
The benefits from the redemption of such ulps will now be made as capital gains to suit other investment products.
It removes previous confusion, especially for Ulips released before 1 February 2021, which had unclear tax treatment.
They are now treated like equity-oriented funds, in which the capital benefits (Section 45) are benefited.
Tax expert CA Suresh Surana explains that Section 10 (10D) is used to provide a discount for life insurance policies including ULIP, if they meet specific terms, such as a premium estimate from 10% It was not more or for a premium cap of ₹ 2.5 lakh.
If these conditions were precious, income was either made from capital gains or income from other sources, based on the type of policy.
Major provisions of amendment
Under Section 10 (10D), exemption applies:
The premium does not exceed 10% of the confused amount (for policies released after April 1, 2012).
The ULIP premium does not exceed ₹ 2.5 lakh.
When these conditions are not met, the amount received from the policy will be made as capital gains for ULIPS or will be income from other sources for non-ULIP policies.
Amendments standardize tax treatment of all ulips, regardless of their problem date. As Surana states, it is taxed on both ulip and non-Ulips, ensuring continuity in this way. ULIP is now classified as capital assets and their profits will be taxed as capital gains, such as equity-oriented money
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