Taxation of redemption of ULIP after lock-in-period of 5 years

I have purchased some Ulip policies in August 2019 with premium paying term of 5 years and policy period varying from 10 years to 15 years. If I redeem the ULIP after lock-in-period of 5 years, ie. BEFORE the end of policy period, then

1) is the capital gains in the redemption value taxable

2) if it is taxable as LTCG, will indexation apply?

regards

Abhik Pal

Replies (3)
Quick Summary
This discussion clarifies the taxation of Unit Linked Insurance Plans (ULIPs) redeemed after the initial 5-year lock-in period but before the policy term ends. It addresses whether capital gains are taxable and if indexation benefits apply. The consensus is that ULIPs issued before 1st February 2021 may be subject to long-term capital gains tax upon redemption after 5 years, as Section 10(10D) exemption might not apply in such scenarios.

ULIP issued on or after 01/02/2021 are considered for capital gain taxation. In other cases check the applicability of 10(10D) exemption

Thanks Mr Abhishek. My ULIPS are purchased before 01/02/2021 and in the new regime I understand Section 10D is not applicable. So in my case will LTCG be imposed if I sell it after 5 years but before policy term?

Section 10D exemption is not withdrawn for new tax regime, from April 2023 where policies issued after this date where premium exceeds 5 lacs are taxable other than ULIPs, in other cases if the conditions are met it is exempt

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