New Delhi: The government has not imposed any new tax on Unit Linked Insurance Plans (ULIPs) but has implemented the previous year’s plans. Budget Sources in the tax department made the announcement through a circular on Monday.
finance act Also put a provision in 2021 income tax act To make income from ULIP taxable capital gains, just like redemptions from mutual funds. It had also entrusted the Center with the power to prescribe a method of computing capital gains, while it was notified on January 18.
The amendment had specified that if there is more than one policy, the premium limit of Rs 5 lakh for one year would be applied by aggregating the premiums of such policies which require clarity, as per the one issued on January 19. was done through circular. Revenue department sources said.
“They only prescribe and clarify the manner of computation of capital gains as per the amendment made by the Finance Act 2021,” an official said.
The Finance Act 2021 provides that the amount received under ULIPs issued on or after February 1, 2021 will not be exempted if the annual premium exceeds Rs 2.5 lakh. “This provision was enacted to create an equal opportunity between mutual fund investment and ULIP Investment. In case of mutual funds, capital gains tax is levied on the redemption units. However, in case of ULIPs, there was a redemption discount even though the insurance portion of the premium was very low and the investment portion of the premium was high. This amendment of the Finance Act 2021 ensured that both mutual fund units and ULIPs operate on the same footing,” explained a source.
General exemption provided in cases where the annual premium was up to Rs 2.5 lakh, so that the premium paid for the life insurance portion is not hit.
finance act Also put a provision in 2021 income tax act To make income from ULIP taxable capital gains, just like redemptions from mutual funds. It had also entrusted the Center with the power to prescribe a method of computing capital gains, while it was notified on January 18.
The amendment had specified that if there is more than one policy, the premium limit of Rs 5 lakh for one year would be applied by aggregating the premiums of such policies which require clarity, as per the one issued on January 19. was done through circular. Revenue department sources said.
“They only prescribe and clarify the manner of computation of capital gains as per the amendment made by the Finance Act 2021,” an official said.
The Finance Act 2021 provides that the amount received under ULIPs issued on or after February 1, 2021 will not be exempted if the annual premium exceeds Rs 2.5 lakh. “This provision was enacted to create an equal opportunity between mutual fund investment and ULIP Investment. In case of mutual funds, capital gains tax is levied on the redemption units. However, in case of ULIPs, there was a redemption discount even though the insurance portion of the premium was very low and the investment portion of the premium was high. This amendment of the Finance Act 2021 ensured that both mutual fund units and ULIPs operate on the same footing,” explained a source.
General exemption provided in cases where the annual premium was up to Rs 2.5 lakh, so that the premium paid for the life insurance portion is not hit.
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