The new taxation norms in ULIPs will be applicable from February 1, 2021, says the budget 2021 document.
In the budget 2021, the government has proposed that investors can avail tax benefits in ULIPs only if annual premium does not exceed Rs.2.50 lakh. This means, if an investor invests more than Rs.2.50 lakh in ULIPs, he will not be eligible to avail exemption on capital gains tax.
However, there will be no tax if exit is due to death of policyholders.
The taxation will be in line with mutual funds. While the long-term capital gains tax in equity oriented ULIPs is 10% on amount exceeding Rs.1 lakh, the short-term capital gains tax is 15%. Long-term capital gains tax in equity oriented ULIPs is applicable after 1 year.
Similarly, long-term capital gains tax in debt oriented ULIPs is 20% with indexation if the holding period exceeds three years. Short-term capital gains tax in such funds is taxed at the marginal rate of taxation.
