If the conditions of section 10 (10D) are not met, then tax will have to be paid
Unit Linked Insurance Policy: The budget 2025 presented on 1 February has cleared a lot about the redemption of the Unit-Linked Insurance Policy (ULIP) or the taxation of maturity income. A total of more than Rs 2.5 lakh premium in a year is not eligible for tax exemption under section 10 (10D). Along with this, such a policy will now be considered as equity-oriented mutual funds. That is, there will be a tax system like equity-oriented funds for such policy. Therefore, the profit received on maturity will be considered a capital gains tax. This new amendment to ULIP will be applicable from 1 April 2025.
If the conditions of section 10 (10D) are not met, then tax will have to be paid
The FAQs of the Income Tax Department states, “If the terms of section 10 (10D) are not met, then the returns received under the insurance policy are Capital Gains Tax (for Unit-Linked Insurance Policy) or Income from other sources ( Taxes can be levied as for policy other than ULIP).
Capital gains tax
Let us tell you that the sale of equity and equity mutual fund units is taxed at long -term capital gains of more than Rs 1.25 lakhs every year, while a tax of 20 percent on short -term capital gains (holding period of short -term capital gains (holding period less than 12 months) Tax is charged. In Budget 2024, capital gains tax structure was rationalized in different asset classes.
What is section 10 (10D)
Under Section 10 (10D) of the Income Tax Act, any amount received under the life insurance policy, including a bonus on such a policy, is free from tax. Therefore, the claim amount of policy holders on maturity or the policy of policyholder is tax free to the nominee. However, these discounts are combined with certain conditions. Where the annual premium is more than 10 percent of the sum insured, in such cases the tax exemption cannot be taken advantage of.
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