Tax Rate on maturity of ULIP

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If your Unit Linked Insurance Plan (ULIP) doesn't qualify for the Section 10(10D) capital gains exemption upon maturity, the tax treatment is similar to that of a long-term mutual fund. Even if you've switched between debt and equity funds within the ULIP, the long-term capital gains (LTCG) will be taxed at a flat rate of 12.5% without indexation.

Akshit Jain

Akshit Jain (Querist)

07 December 2024 What is the tax rate at maturity on ULIP (Unit Linked Insurance Plan) that does NOT qualify for capital gain exemption under Section 10(10D)? Is it treated like a mutual fund held long-term? Also, does the distinction between the tax rates for debt and equity apply?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

08 December 2024 1. Yes.
2. Yes.

Akshit Jain

Akshit Jain (Querist)

08 December 2024 In a ULIP, the distinction between debt and equity funds is not always clear. For instance, one can hold x% in a debt fund and the remainder in an equity fund in any combination. Also, one can switch from one fund to another during the life of the ULIP. For example, one can hold a debt fund for the first five years and equity for the last five years. At maturity or surrender of the ULIP would it be considered a debt fund or an equity fund?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

08 December 2024 Yes, even in such case the LTCG will be taxed at flat 12.5% without indexation.

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