Finance Bill 2021-22 has proposed to tax gains from ULIP with a premium of more than Rs. 2.5 lakh per year to remove the disparity relative to mutual funds. This means from Feb 1st 2021 if you buy a new ULIP with a premium of more than Rs. 2.5 lakhs the maturity proceeds will be taxed identically to mutual funds. Death benefits continue to remain tax-free regardless less of the premium amount. This will reduce mis-selling of ULIPs.
This rule applies to the sum of the premium of the ULIPs purchased on or after 1st Feb 2021. For example, if you buy three ULIPs and the total premium is above Rs. 2.5 lakh then the gains from all the three ULIPs will be taxed like mutual funds.
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