Big rule related to insurance policy, which you should know, otherwise loss can happen

Big rule related to insurance policy, which you should know, otherwise loss can happen

There are different rules regarding insurance policy. 
If you take a policy and do not know these rules, then a lot of losses may have to be incurred. In such a situation, it is very important for you to keep their information. In terms of investment, people buy unit-linked insurance policies ie ULIPs. The government has also made rules for ULIPs. They change from time to time. In such a situation it becomes important for you to know about them.

The government has imposed tax on the amount received on the maturity of the unit-linked insurance policy ie ULIP. Earlier, the amount received on maturity was tax-free under section 10 (10D), but from April 1, under this section, you will be able to get tax-free amount only if your investment is less than 2.50 lakhs per annum. That is, you will have to pay tax on the amount received on maturity of Ulik for an investment of more than Rs. 2.50 lakhs per annum. However, this rule will be effective on policies sold after 1 February 2021.

Capital gains will be taxed

Since the government's announcement, capital gains on ULIPs will be taxed in the same way as mutual funds. Gains of more than 1 lakh rupees in any one financial year attract 10 percent long-term capital gains tax. From now on, ULIPs with an annual premium of more than 2.5 lakh rupees will not get this benefit of tax exemption.

If you want to get the benefit of tax exemption on Ulip maturity, then your sum assured should be 10 times the annual premium. If it is less then the government will have to pay tax on maturity.

What other conditions will be taxed?

The government has made many other rules, under which you may have to pay tax on the maturity of ULIPs. You will have to pay tax even if your equity component is more than 65 percent. In this stage LTCG tax will be levied. At the same time, if the equity component is 65 percent or less, then under debt fund, 20 percent tax will be levied.

What is ULIP?

It is a unit linked insurance product. Its special thing is that insurance and investment benefits are available here. They are offered by insurance companies. When you pay the ULIP premium, a part of it is used by the insurance company to provide you insurance coverage and the rest is used to invest in debt and equity. The combination of insurance and investment in ULIPs comes with a lock-in period of 5 years.

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