ULIP Taxation Clarified: Capital Gains Rules Explained
Why in the news
The government revised ULIP taxation, removing doubts and aligning them with mutual funds.
Key facts
- ULIP: part of the premium buys insurance, the rest is invested.
- Non-qualifying ULIPs count as capital assets, whatever their issue date.
| Section 10(10D) test | Limit |
|---|---|
| Premium vs sum assured (issued after 1 April 2012) | Up to 10% |
| Annual premium | Up to ₹2.5 lakh |
| Test failed: ULIP / non-ULIP | Capital gains / other sources |
Significance
- Uniform tax treatment and simpler compliance.
- Better-informed investor planning.
Exam angle
- Exemption section: 10(10D).
- Lock-in: 5 years.