Taxability of ulip withdrawl


This query is : Resolved 

(Querist)
31 January 2012 Under which head will the amount be taxable on withdrawl of ULIP before 5years?

10 March 2012 Under ULIP units are bought from money invested in the policy. Units purchased are capital assets under the Income Tax Act. So if Units are sold within one year of Investment, you have to pay short term capital gains. So ensure that at least 1 year has passed from the last premium payment date before redeeming your units.

If the units are held for more than a year, they become long term capital gains and long term capital gains are exempt from tax. Securities Transaction Tax would be deducted at the time of redemption of Units.

Now, though we said they would be tax free it would depend on the type of fund the amount was invested in. If the amount was invested in equity oriented funds and held for more than 1 year then the capital gains are tax free, conversely if they are sold within 1 year the short term capital gains tax has to be paid.

Similarly, debt-oriented funds attract a long-term capital gains tax, while a short-term capital gain would be tax at the investor’s normal tax rate.


And if it is taxable then it will be taxable Under the Head of Income from Capital Gains.


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