Taxation
of Unit Linked Insurance Plan (ULIP)
v Taxation of ULIP,
policy being issued before 01-02-2021
Sum received under ULIP will
be exempt in following cases:-
1. If ULIP is issued
on or after 01-04-2003 but on or before 31-03-2012 – Annual Premium
does not exceed 20% of sum assured
2. If ULIP is issued
on or after 01-04-2012- Annual Premium does not exceed 10% of Sum assured
( 15% where insurer is person suffering from disability referred to in section
80U or suffering from disease referred to in section 80DDB)
The conditions
(1) & (2) are referred to as BASIC CONDITIONS in this artifact.
3. Amount received
on the death of Insurer, even if basic conditions are breached i.e. annual
premium is in excess of20%/15%/10% of sum assured.
4. If the amount
becomes taxable (Due to breach of basic conditions), Net Amount (Amount received
against ULIP less premium paid), is taxable under the head Income from other
sources.
v Taxation of ULIP,
policy being issued on or after 01-02-2021
1. Basis Conditions
are breached- Amount received against ULIP less premium paid, is taxable under the
head Income from other sources.
2. Basic Conditions
are satisfied –
a) Annual policy
premium is within Prescribed limit- The amount received against the policy will
be exempt, as per Exemption provisions stated below (non-applicability of 4th
and 5th Proviso to section 10(10D))
b) Amount received on death of insurer- Entire Amount is exempt, even if annual premium is beyond prescribed limits.
3. Taxability, when
basic conditions are satisfied but annual premium is beyond prescribed limits
If the amount
become taxable due to applicability of 4th and 5th
Proviso to section 10(10D) (Basic conditions are also satisfied) – The Amount
will be taxable under the head Capital Gains u/s 45(1B), computed as under
(Rule 8AD):-
A) Amount is receive
first time against ULIP- The capital gain will be taxable in the year in which
amount is received and will be computed as under:-
i)
Holding Period –
12 months i.e. there will be STCG if amount is received upto 12 months
from date from which policy was taken.
ii)
Tax rate – 10% (without indexation) in excess of Rs.
1,00,000 for LTCG and 15% for STCG. The benefit of utilization of unexhausted
basic limits will be available. Rebate u/s 87A will be available against STCG
but not against LTCG.
iii)
Gain – Amount received against ULIP less Premium
paid till receipt of amount.
B) Amount is
received subsequently (after receipt amount in earlier previous year) – The
capital gain will be taxable in the year in which amount is received
subsequently and will be computed as under:-
i)
Holding Period and tax rate – Same as above
ii)
Gain – Subsequent Amount received less premium paid
after date of first receipt of amount till receipt of subsequent amount.
Ø Consideration is received
first time on transfer of ULIP, is exempt in the following cases:-
1. Single ULIP- Annual premium
payable for any previous year does not exceed Rs. 2,50,000-
Capital Gain will be exempt
2. Multiple ULIP
a) Aggregate premium
payable for all ULIP for any previous year does not exceed Rs. 2,50,000 – Capital
Gain on transfer of all ULIP will be
exempt.
b) Aggregate Premium
payable for all ULIP for any previous year exceeds Rs. 2,50,000
– Capital Gain on transfer of those ULIP will be exempt, where aggregate
of premium payable for those ULIP for any previous year does not exceed Rs.
2,50,0000
Illustrations
|
Particulars |
ULIP-A |
ULIP-B |
|
Date of Issue |
01-04-2021 |
01-04-2021 |
|
Annual Premium |
Rs. 1,00,000 |
Rs. 1,00,000 |
|
Year of Consideration |
PY 2029-30 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
Yes |
Yes |
|
Reason |
Aggregate Premium in any
previous does not exceed Rs. 2,50,000, so capital gain on transfer of all ULIP will be exempt. |
|
|
Particulars |
ULIP-A |
ULIP-B |
|
Date of Issue |
01-04-2021 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 11,00,000 |
|
Year of Consideration |
PY 2029-30 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
Yes |
No |
|
Reason |
1. Aggregate Premium
in any previous year is more than Rs. 2,50,000, 2. Exemption can
be claimed either for A or B , as its independent premium does not exceed Rs.
2.5 lacs. 3. The exemption
will be claimed for A, as Capital Gain is more than B (Tax will be less). |
|
|
Particulars |
ULIP-A |
ULIP-B |
|
Date of Issue |
01-04-2021 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 3,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 33,00,000 |
|
Year of Consideration |
PY 2029-30 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
Yes |
No |
|
Reason |
1. Aggregate
Premium in any previous is more than Rs. 2,50,000, 2. Exemption can
be claimed for A only , as its independent premium does not exceed Rs. 2.5
lacs. |
|
|
Particulars |
ULIP-A |
ULIP-B |
ULIP – C |
|
Date of Issue |
01-04-2021 |
01-04-2021 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 3,00,000 |
Rs. 50,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 33,00,000 |
Rs. 6,00,000 |
|
Year of Consideration |
PY 2029-30 |
PY 2029-30 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
Yes |
No |
Yes |
|
Reason |
1. Aggregate
Premium in any previous is more than Rs. 2,50,000, 2. Exemption can
be claimed for A & C only, as their aggregate premium does not exceed Rs.
2.5 lacs. |
||
|
Particulars |
ULIP-A |
ULIP-B |
ULIP – C |
|
Date of Issue |
01-04-2021 |
01-04-2021 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 3,00,000 |
Rs. 1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 33,00,000 |
Rs. 11,00,000 |
|
Year of Consideration |
PY 2029-30 |
PY 2029-30 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
Yes |
No |
No |
|
Reason |
1. Aggregate
Premium in any previous is more than Rs. 2,50,000. 2. Exemption can
be claimed either for A & C only, as their Independent premium does not
exceed Rs. 2.5 lacs. 3. Exemption will
be claimed for ULIP-A, as Capital Gain is less than C. |
||
|
Particulars |
ULIP-A |
ULIP-B |
ULIP – C |
ULIP-D |
|
Date of Issue |
01-04-2022 |
01-04-2022 |
01-04-2022 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 3,00,000 |
Rs. 1,00,000 |
1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 33,00,000 |
Rs. 11,00,000 |
Rs. 13,00,00 |
|
Year of Consideration |
PY 2029-30 |
PY 2029-30 |
PY 2029-30 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
No |
No |
Yes |
Yes |
|
Reason |
1. Exemption is
available for ULIO-D, as premium in 2020-21 does not exceed Rs. 2.5 lacs
(Premium is any year does not exceed Rs. 2.5 lacs) 2. Aggregate
Premium in rest of previous year is more than Rs. 2,50,000 3. Exemption can
be claimed for C also as its premium
together with premium of D does not exceed Rs. 2.5 lacs. 4. Exemption
cannot be for A, although its independent premium does not exceed Rs. 2.5
lacs, but its premium with D exceed 2.5 lacs |
|||
|
Particulars |
ULIP-A |
ULIP-B |
ULIP – C |
ULIP-D |
|
Date of Issue |
01-04-2022 |
01-04-2022 |
01-04-2022 |
01-04-2020 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 3,00,000 |
Rs. 1,00,000 |
1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 33,00,000 |
Rs. 11,00,000 |
Rs. 13,00,00 |
|
Year of Consideration |
PY 2029-30 |
PY 2029-30 |
PY 2029-30 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
No |
No |
No |
Yes |
|
Reason |
1. Exemption is
available for ULIO-D, as it was issued before 01-02-2021 and it will not be
considered in aggregating premium limit of Rs. 2.5 lacs 2. Aggregate
Premium in previous year for rest of ULIP is more than Rs. 2,50,000 3. Exemption can
be claimed for A only, as its premium together does not exceed Rs. 2.5 lacs. 4. Exemption
cannot be claimed for C simultaneously , although its independent premium
does not exceed Rs. 2.5 lacs, but its premium with A exceed 2.5 lacs 5. Exemption can
be claimed for C, instead of A, but assessee will not do that, as Capital
gain is less in C than in A. |
|||
Ø
Consideration has been received under eligible ULIP
( ULIP issued on or after 01-02-2021) in earlier previous year (OLD ULIP) and
claimed exempt. Further consideration is received in current previous
year in respect of other eligible ULIP/ULIPs (new ULIP/ULIP’s)
Exemption in respect of
consideration received in Current previous year
1. Consideration is
received in Current Previous year in respect of single New ULIP
a) Aggregate of
Premium in respect of OLD and NEW ULIP does not exceed Rs. 2,50,000 in
any of the previous year – Consideration in respect of new ULIP will
be exempt
b) Aggregate of
Premium in respect of OLD and NEW ULIP exceeds Rs. 2,50,000 in any of
the previous year – Consideration in respect of new ULIP will
NOT be exempt.
2. Consideration is
received in Current Previous year in respect of multiple New ULIPs
a) Aggregate of
Premium in respect of OLD and NEW ULIPs does not exceed Rs. 2,50,000 in
any of the previous year – Consideration in respect of new ULIPs will
be exempt
b) Aggregate of
Premium in respect of OLD and NEW ULIP exceeds Rs. 2,50,000 in any of
the previous year – Consideration in respect of those new ULIPs
will be exempt, where aggregate of premium in respect of Old ULIP and those new
ULIPs does not exceed Rs. 2,50,000 in any of previous year.
Illustrations
|
Particulars |
ULIP-A |
ULIP-B |
|
Date of Issue |
01-04-2021 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 11,00,000 |
|
Year of Consideration |
PY 2029-30 |
PY 2030-31 |
|
Exemption u/s 10(10D) |
Yes (claimed) |
No |
|
Reason |
1. Aggregate
Premium in any previous year is more than Rs. 2,50,000. 2. Exemption will
be claimed for A in PY 2029-30, since it’s independent premium is less than
2.50 lacs 3. Exemption cannot
be claimed for B , as aggregate premium of A & B exceeds Rs. 2.50 lacs in
one of the previous year and exemption has been claimed for A in earlier
year. |
|
|
Particulars |
ULIP-A |
ULIP-B |
|
Date of Issue |
01-04-2021 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 11,00,000 |
|
Year of Consideration |
PY 2030-31 |
PY 2029-30 |
|
Exemption u/s 10(10D) |
Yes |
No |
|
Reason |
1. Aggregate
Premium in any previous year is more than Rs. 2,50,000. 2. Exemption has
not been claimed for B in PY 2029-30, even though it’s independent premium is
less than 2.50 lacs. 3. Exemption be
claimed for A , as it’s independent premium of does not exceeds Rs. 2.50 lacs
and no deduction has been claimed for B. |
|
|
Particulars |
ULIP-A |
ULIP-B |
|
Date of Issue |
01-04-2020 |
01-04-2021 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 11,00,000 |
|
Year of Consideration |
PY 2029-30 |
PY 2030-31 |
|
Exemption u/s 10(10D) |
Yes |
Yes |
|
Reason |
1. A is not eligible
ULIP, as it was issued before 01-02-2021 and income arising thereon is exempt,
assuming basis conditions are satisfied. 2. Exemption can
be claimed for B, as independent premium of A does not exceed Rs. 2.50 lacs. |
|
|
Particulars |
ULIP-A |
ULIP-B |
ULIP – C |
ULIP-D |
|
Date of Issue |
01-04-2022 |
01-04-2022 |
01-04-2022 |
01-04-2022 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 3,00,000 |
Rs. 1,00,000 |
1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 33,00,000 |
Rs. 11,00,000 |
Rs. 13,00,00 |
|
Year of Consideration |
PY 2029-30 |
PY 2030-31 |
PY 2030-31 |
PY 2030-31 |
|
Exemption u/s 10(10D) |
Yes |
No |
No |
Yes |
|
Reason |
1. Exemption has
been claimed for A in PY 2029-30, it’s independent premium does not exceed
Rs. 2.5 lacs 2. Aggregate
Premium in any of previous year is more than Rs. 2,50,000 3. Exemption cannot
be claimed for rest of ULIP in next year, their premium, along with premium
of A, exceeds Rs. 2.50 lacs. |
|||
|
Particulars |
ULIP-A |
ULIP-B |
ULIP – C |
ULIP-D |
|
Date of Issue |
01-04-2022 |
01-04-2022 |
01-04-2022 |
01-04-2022 |
|
Annual Premium |
Rs. 1,50,000 |
Rs. 50,000 |
Rs. 1,00,000 |
1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 6,00,000 |
Rs. 11,00,000 |
Rs. 13,00,00 |
|
Year of Consideration |
PY 2029-30 |
PY 2030-31 |
PY 2030-31 |
PY 2030-31 |
|
Exemption u/s 10(10D) |
Yes |
No |
No |
Yes |
|
Reason |
1. Exemption has
been claimed for A in PY 2029-30, it’s independent premium does not exceed
Rs. 2.5 lacs 2. Aggregate
Premium in any of previous year is more than Rs. 2,50,000 3. Exemption can
be claimed for D only, as its premium together with premium of A does not
exceed Rs. 2.5 lacs. 4. Exemption can
be claimed for C or B, instead of D, but it will not be done, as the Capital
gain is more in D. |
|||
|
Particulars |
ULIP-A |
ULIP-B |
ULIP – C |
ULIP-D |
|
Date of Issue |
01-04-2022 |
01-04-2022 |
01-04-2022 |
01-04-2022 |
|
Annual Premium |
Rs. 2,00,000 |
Rs. 50,000 |
Rs. 1,00,000 |
1,00,000 |
|
Consideration |
Rs. 22,00,000 |
Rs. 6,00,000 |
Rs. 11,00,000 |
Rs. 13,00,00 |
|
Year of Consideration |
PY 2029-30 |
PY 2030-31 |
PY 2030-31 |
PY 2030-31 |
|
Exemption u/s 10(10D) |
NOT CLAIMED |
Yes |
Yes |
Yes |
|
Reason |
1. Exemption has
been not claimed for A in PY 2029-30 by assessee, even though it’s
independent premium does not exceed Rs. 2.5 lacs 2. Aggregate
Premium in any of previous year, excluding A, does not exceed Rs. 2,50,000 3. Exemption can
be claimed for B, C and D, as their aggregate premium does not exceed Rs. 2.5
lacs. |
|||
