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ULIP scheme: Big news for insurance policy buyers! Soon new rules, what is the ULIP scheme

The 2021 budget stipulates that those with a premium of more than Rs 2.5 lakh in ULIPs will not be exempted.

New Delhi: Union Finance Minister Nirmala Sitharaman has made a number of big announcements in the budget presented on February 1, 2021. Information was also given in the speech about one of these insurance related ULIP scheme . The 2021 budget stipulates that those with a premium of more than Rs 2.5 lakh in ULIPs will not be exempted. This rule will apply to ULIPs purchased on or after February 1, 2021. (What Is Ulip Insurance Policy Is Ulip a Good Investment Government Of India No More Tax Exemption For Ulips With Annual Premium Above 2 Lakh)

Experts say the government’s move will help meet investors’ insurance and investment needs. Now investors can invest in a variety of products, as well as buy. This will further increase the flexibility in mutual funds. Investment in equity mutual funds will increase, and tax benefits will end in the new ULIP with higher premiums.

What is a ULIP?

A unit-linked insurance plan is a combination of an insurance policy and market-linked investment products. Under this policy, a portion of the premium is invested in an equity or debt fund. The integration of insurance and investment in this product has a lock-in period of 5 years. Risk allows customers to invest in large, medium or small cap, debt or balanced investments. It is also allowed to switch between different funds. ULIPs have two options, one is pension and the other is endowment.




What will happen now?

In the 2021 budget, it has been provided that Ulip will not get a discount with a premium of more than Rs 2.5 lakh. This rule will apply to ULIPs purchased on or after February 1, 2021. Thus the benefit of these unit linked insurance plans i.e. ULIP will be considered as capital gain. Such ULIPs will be taxed as an equity fund. The amount currently received on maturity of the insurance policy is tax deductible under Section 10 (10D). This discount sets Ulips apart from equity funds.

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Both investment and insurance are presented in ULIP. Two years ago, a long-term capital gains tax of 10 per cent was proposed on equity mutual fund equities above Rs 1 lakh. Experts say some investors may have saved only 10 per cent tax on ULIPs. Now that ULIPs have also come under the tax net, mutual fund advisers are positive.




Important things related to Ulips

Allocation, Policy Administration, Mortality and Fund Management Charges. The fund management fee is 1.35%. You can claim a deduction under Section 80C of the Income Tax Act by investing in a ULIP. Ulip was exempted from LTCG tax in last year’s budget. This is an EEE (Exempt Exemption) product, in which a tax exemption can be sought under Section 80C. If you want to invest in ULIP, first consider whether you are looking at this product as an investment tool or as a life cover. You have to have a lot of time to invest in it and you need to know about the products related to the market.

ULIP is nothing special except a life cover product, as the sum insured is limited to 10-15 times of the premium. In case of investment, the ULIP plan is for a lock-in period of 5 years.

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