Summary:
New Delhi, Jan 24 (PTI) Proceeds of high-premium Unit Linked Insurance Plans (ULIPs) has been made taxable to create a "level-playing field" with mutual funds, official sources said on Monday.
The Central Board of Direct Taxes (CBDT), that frames policy for the income tax department, had on January 18 notified the rules stating the method of calculation of capital gains with regard to ULIPs with annual premium of more than Rs 2.5 lakh and subsequently issued a circular the next day charting out various aspects of their taxation.
Income-tax department sources told PTI that the rules and guidelines were notified by the CBDT to give effect to the announcement made with regard to ULIPs in the last Union Budget.
These do not bring any new taxation provision but only clarify the method of calculation of capital gains when it comes to redeeming ULIPs in specified cases, they said.
"The Finance Act of 2021 carried out amendment in section 10(10D) of the Income-tax Act following which the sum received under ULIPs issued on or after Feb 1, 2021, shall not be exempt if the annual premium payable for any year exceeds Rs 2.50 lakh.
"This provision was enacted to create level playing field between mutual fund investment and ULIP investment," a senior I-T department official said.