@Bharti_Vasvani and @Shrutika_Shah kindly reply the above message it would be great help to me.
Hello @pankaj_lakhanpal,
The taxation on ULIP was updated from 1st February 2021 and the change in taxation is prospective. Since the policy purchased by you is prior to that date it would be taxed as Income from other sources only.
Hope this clarifies!
I bought a “UTI” ULIP in 2007 and it matured in April 2022, my sum insured for the same was around 5 lakh and I have been paying a premium of 32k every year from 2007 till 2019. And I got some bonus units in Jan 2022. How will it be all taxed including the bonus units??
I am new and want to understand taxation on ELSS/ULIP investments. I have a few questions: -
-
If I am investing in MF and redeeming 1L profit yearly (which is tax-free) then whether profit of 1L from my ELSS or ULIP investment (if I start it) also be tax-free (hence total 2L tax-free profits)?
-
How returns on ELSS are taxed - (a) does the tax deducted at source yearly basis like on FDs (at our ELSS AMC) before giving returns (and hence total investment value next year is tax-adjusted) to the investor? or (b) No tax will be deducted irrespective of profits generated and years invested, unless we redeem/sell them and we need to show in our ITR for that financial year(s) when we sold ELSS/ULIP unit(s)?
-
If I am already investing in PPF and insurance 2L (cap 1.5L in 80C) yearly and MFs (assume MF are also giving profits 1L each year - which I am redeeming every year) then whether investing in ELSS/ULIP and showing under 80C in ITR will give me any additional tax benefits?
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What would be the case if, in point #1 above, I am investing in MFs for the long term (i.e. not redeeming MFs for 1L tax-free profits)? Given the 80C limit already taken by PPF and insurance premium, then whether ELSS/ULIP be tax beneficial to me in this case - (a) When I am selling only ELSS/ULIP units yearly while not selling any MF units/investments; (b) Neither selling ELSS nor selling MF units/investments for a period of say 10 years?
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Whether ELSS/ULIP investments come under the Exempt, Exempt, and Exempt category - like PPF? Or any cap on tax exemption at maturity (say withdrawing from ELSS/ULIP after 20 years)?
Thanks.
Hey @AG_125,
- There is a combined limit on LTCG. If there is any LTCG from sale of listed equity shares or ELSS or Equity based MF or ULIP there is exemption upto ₹1 Lakh.
- The difference between the sales consideration received and the amount of investment done in ELSS is considered Capital gains and taxed. Any income received during the period of holding by way of dividend then it is taxed as Other Source Income. The amount shall be total dividend without reducing the TDS deducted.
- As mentioned by you, the limit under 80C is already exhausted by investing in PPF and insurance, you won’t get any additional benefit under 80C with respect to ELSS or ULIP.
- The taxation will be same, it will be considered as LTCG with exemption upto ₹1 Lakh.
- No, any income received during the period you hold ELSS or ULIP is taxable under Other Source Income and at the time of redeeming the units they are taxed as LTCG.
You can read more on ELSS Mutual Fund and ULIP Taxation
Hope this helps!
1 Like
Appreciate your response… we are getting a refund because it is an NRE account and we dont have any other tax liability… if this is a resident account still he can claim this refund provided no tax liability…
Can a resident indian claim refund the TDS deducted by ICICI pru life insurance ULIP plan
if he does NOT have any tax liability during filing returns
Hey @Fazlu,
Yes, if the TDS exceeds your tax liability for the year, you can claim it as a refund.
Hope this helps!
Hello Miss Mistry @CA_Niyati_Mistry
If I purchase (2) ULIP 20 year policies as a Policyholder in March 2024 with Maturity in 2044, each having annual premium of Rs. 2.5 lakh, one for my 6 year old son as beneficiary (Life Assured) and second for my 6 year old daughter as beneficiary(Life Assured). So when each policy matures in 2044, the policy would be passed on to my son and daughter and they would not be minor anymore. So in that case who gets exempt under 10(10D) for maturity payout? My son or my daughter?
Any insight and guidelines you provide is highly appreciated.
Thank you
Shah
Hey @10r10usa,
As the aggregate amount of premium paid exceeds ₹2.5 lakhs, the entire proceeds on maturity would be taxable for both policies.
However, in case of death, the maturity amount becomes tax-free.
Hope this helps!
@Surbhi_Pal looks like 2023 amendment was more directed towards non-ULIPs and the ULIP limit still stands at 2.5lakh. Could you please confirm or if I am wrong here? Thanks
Hi @10r10usa,
I connected with my team with regard to the query. Yes, the new amendment is valid for life insurance policies other than ULIPs.
I have rectified my previous reply based on the same.
Hope it clarifies.
Hey @Surbhi_Pal , but the original post by @CA_Niyati_Mistry states that policies upto Rs.2.5lakh are excempt from tax at Maturity, but any other policies that bring the premium above 2.5lakh will get taxed.
Could you please double confirm? Thank you.
Other question i have: If I am the Policyholder/Proposer of a ULIP policy and my 6 years kids being the Insured(Life Assured), after 20 years at Maturity my kids would be Major. At that time the Maturity payout goes to me or my kids(who will be major then)?
Thank you
@Surbhi_Pal @CA_Niyati_Mistry
So out of 2 policies with 2.5lakh premium one will get tax free benefit at maturity and other would be taxed?
Hello @Surbhi_Pal see this example 3 from @CA_Niyati_Mistry from very first post on this blog…
According to this policy 1 with 2lakh premium is exempt and policy 2 with 1lakh premium is taxed.
So in case of my scenario shouldn’t atleast one policy with 2.5lakh premium be exempt?
Thank you.
Hi @10r10usa,
With regards to your queries,
The exemption can be claimed with respect to policies whose aggregate premium does not exceed ₹2.5L. In your case, if you claim the exemption on one of the policies, the other one becomes taxable. Generally, if you take multiple ULIPs, you can take the exemption on one with a higher sum assured. However, here, as both the policies are identical, you can take the exemption on either of them.
Apologies for the confusion. Hope this clarifies your query.