ULIP Purchase by Parent

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This discussion clarifies the tax implications when a parent purchases a single-premium ULIP for their adult child, where the parent is the proposer and payer. It addresses whether the ULIP should be reported on the parent's tax schedule or considered a gift to the child, and if a gift deed is necessary. The conversation also explores how ULIPs are reported on Annual Information Statements (AIS) and AS26, specifically concerning which PAN (parent's or child's) is used and whether the purchase itself is reported or only the maturity/surrender.

Akshit Jain

Akshit Jain (Querist)

12 February 2025 If a parent is the proposer and payer of a single-premium ULIP that insures the life of his adult child, the parent has effectively bought the ULIP on behalf of the child. I have the following queries:
A. Would the ULIP need to be reported on the parent's Schedule AL at the end of the tax year or would it be deemed a gift to the child? If the latter, is a gift deed required?
B. Are insurance companies required to report ULIPs on AIS/AS26? The question arises because ULIP is not a security like shares or mutual funds. If reported, would it be on the AIS of the parent's PAN, the child's PAN, or both?

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

12 February 2025 1. Treat it as gift, no gift deed required.
2. It will be reported on maturity or surrender in the PAN of insured person.

Akshit Jain

Akshit Jain (Querist)

12 February 2025 Thank you for the precise answers. Regarding your response #2, is it correct to conclude that reporting will only be at the time of surrender/maturity and the purchase will not be reported?

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

18 February 2025 Yes, the purchase of ULIP cannot be reported in ITR, unless in Balance sheet.

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