CBDT issued Guidelines on Income Tax Exemption for Unit Linked Insurance Policies (ULIP) Receipts under Section 10(10D) vide a Circular 2/2022 dated 19/01/2022. This circular explains the methodology to find out the tax exemption status of ULIPs. Section 10(10D) of the Income Tax Act, 1961 provides for income-tax exemption on the sum received under a life insurance policy, including any sum allocated by way of bonus on such policy subject to certain exclusions. The current article briefs the Guidelines under Section 10(10D) of the Income Tax Act.
Highlights of CBDT Guidelines
CBDT clarified that receipts from ULIPs, on maturity/ withdrawal including towards bonus, shall be subject to capital gains tax in the case of policies with an annual premium above Rs. 250,000.
- The old ULIPs which were bought before February 1, 2021, were considered to be exempted,
- The latest CBDT circular states that for exemption the aggregate premium of both new as well as old ULIP will be considered and if the amount exceeds Rs 2.5 lakh then this exemption will not be available for the new ULIP exceeding Rs 2.5 lakh of premium.
Click here to read the official notification
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