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    New TAX provisions for ULIP plans

    Last Updated On 31-03-2021

    Note on section 10(10D) of the Income-tax Act, 1961 (Act) with respect to Unit Linked Insurance Policy (ULIP) as amended by Finance Act, 2021

    In Unit Linked Insurance Policy, the Investment Risk in investment portfolios is borne by the Policyholder

    As per the provisions of section 10(10D) of the Income-tax Act, 1961 (Act), no exemption shall be available on any sum received under a life insurance policy, issued on or after 1 April 2012, where the premium payable for any of the previous year during the term of the policy exceeds 10 per cent of the actual capital sum assured.

    Under the existing provisions of section 10(10D) of the Act, there is no cap on the amount of annual premium being paid by person during the term of the policy.

    The Finance Act, 2021 amended section 10(10D) of the Act to provide that no exemption shall be available to any unit linked insurance policy (ULIP) issued on or after 1 February 2021 if the amount of premium payable for any of the previous year during the term of the policy exceeds Rs 2,50,000. As per the Amended fifth proviso to section 10(10D) of the Act, in case of multiple ULIPs issued on or after 1 February 2021, exemption under section 10(10D) shall be available only with respect to such policies aggregate premium whereof does not exceed Rs 2,50,000 for any of the previous years during the term of any of the policy.

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    Following are the key changes were made in Section 10(10D) of Income Tax Act, 1961 through Finance Act 2021.

    • The amended Section 10(10D) of the Income Tax Act to provide that no exemption shall be available to any unit linked insurance policy (ULIP) issued on or after 1 February 2021 if the amount of premium payable for any of the previous year during the term of the policy exceeds Rs. 2,50,000.
    • If multiple ULIPs issued on or after 1 February 2021, to one policyholders where aggregate premium exceed Rs 2,50,000 for any of the previous years during the term of any of the ULIP policy no exemption shall be available at the time of maturity, surrender or partial withdrawal under Section 10(10D).
    • Any profits and gains arising to a person from receipt of any sum at the time of maturity, surrender or partial withdrawal under such high value ULIP where premium exceed Rs 2,50,000 and it shall be taxable as capital gains in the year of receipt.
    • Any sum received on death of the person will be exempted and no capital gain or tax would be levied under Income Tax Act.
    • Securities transaction tax (STT) applicable on maturity or surrender or partial withdrawal of ULIP issued on or after 1 February 2021 (only on Section 10(10D) non-Compliant Policies)

    To know more about term plan, term insurance, long term savings visit PNB MetLife website.

    Disclaimer:

    The above note prepared based on our interpretation of the relevant Finance Act, 2021 and applicable Income Tax provisions as on 31st March 2021. Tax laws are subject to change from time to time and Clients are advised to consult their tax consultants for more details. AD-F/2020-21/739

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    Disclaimer

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    As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at claimshelpdesk@pnbmetlife.com or indiaservice@pnbmetlife.co.in. You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.

    PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance PlansTerm PlanProtection PlansLong Term Savings Plans , Retirement Plans & Child Education Plan.

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