What Are The Tax Benefits Under Unit Linked Insurance Plans?

What Are The Tax Benefits Under Unit Linked Insurance Plans?

Normally, when it relates to financial considerations, we prefer to react positively towards things with “more” benefits. Unit Linked Insurance Plans (ULIPs) are one of the types of products that provide various benefits in a single commitment. ULIPs offer the combined advantage of offering insurance benefits to individuals in addition to serving as an investment strategy. ULIPs offer life insurance and can help people build income by spending a portion of the premium in debt or equity securities. Investors can get the perfect life cover by investing in ULIPs and contribute for their financial targets too though. 

Tax treatment

Important to note here is that, excluding mutual funds, the ULIP maturity amount is free from tax under Section 10(10d). And the short-term benefits generated by the claimant by transferring from one investment to another are tax-free. This sets ULIPs in a favorable role relative to mutual funds. In addition, the annual premium you owe for ULIP is eligible for a tax advantage under Section 80C. Investment or premium contributions made to ULIP are eligible for a tax deduction on an annual basis. The premium charged is liable for a tax deduction 80C as a tax-saving asset. You can seek a premium exemption for a policy on your behalf or on behalf of your spouse or children. The allowance is below the total cap of Rs 1.5 lakh for each financial year. Often, the conversion of funds within the ULIP is not subject to tax. You should turn as per your desires and within the tools accessible to optimize policy gains. 

ULIP’s maturity profit is exempted from taxation according to the guidelines set out below:

  • In the event of a policy released after 1 April 2012, the premium paid should not surpass 10 per cent of the sum assured.
  • In the event of plans launched before 1 April 2012, the premium charged should not surpass 20% of the amount covered. The amount covered corresponds to the minimum amount assured to the applicant under the insurance terms. The ULIP scheme satisfying the above criteria on the insurance premium receives a full tax deduction on maturity.
  • There is no tax exemption on the estimated value of the units invested in the fund, equivalent to the tax on capital gains on mutual funds. In the case of the death of the policyholder, there is a full exception for the proceeds earned without any limitations added to the payment of the premium.   

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Article first Appeared on Informalnewz


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