Not all ULIPs bought after January 2021 will be Income Tax Exempt: CBDT issues Guidelines [Read Notification]

ULIPs - Income- Tax exempt - CBDT - Guidelines - Taxscan

The Central Board of Direct Taxes (CBDT) has notified the guidelines stating that not all Unit Linked Insurance Policies (ULIPs) bought after January 2021 will be Income Tax exempt.

The Finance Act, 2021 amended clause (10D) of section 10 of the Act by inserting fourth to seventh provisos. The fourth proviso provides that, with effect from 01.02.2021, the sum received under a Unit Linked Insurance Policy (ULIP), issued on or after 01.02.2021, shall not be exempt under the said clause if the amount of premium payable for any of the previous years during the term of such policy exceeds Rs 2,50,000. Further, the fifth proviso provides that if the premium is payable for more than one ULIP, issued on or after 01.02.2021, the exemption under the said clause shall be available only with respect to such policies where the aggregate premium does not exceed Rs 2,50,000 for any of the previous years during the term of any of those policies. The sixth proviso provides that the fourth and fifth provisos shall not apply in case of the sum received on the death of the person.

Sum received including any sum allocated by way of bonus during the previous year (hereinafter referred as “current previous year”) under any one or more ULIPs issued on or after 01.02.2021 (hereinafter referred as “eligible ULIP”) shall be exempt under clause (10D) of section 10 of the Act, subject to the satisfaction of other provisions of said clause.

No consideration is received by the assessee on any eligible ULIPs during any previous year preceding the current previous year or consideration has been received on such eligible ULIPs but has not been claimed exempt. The exemption under clause (10D) of section 10 of the Act shall be determined.

If the assessee has received consideration, during the current previous year, under one eligible ULIP only and the amount of premium payable on such eligible ULIP does not exceed Rs 2,50,000 for any of the previous years during the term of such eligible ULIP, such consideration shall be eligible for exemption under the said clause (10D).

If the assessee has received consideration, during the current previous year, under one eligible ULIP only and the amount of premium payable on such eligible ULIP exceeds Rs 2,50,000 for any of the previous years during the term of such eligible ULIP, such consideration shall not be eligible for exemption under the said clause (10D);

If the assessee has received consideration, during the current previous year, under more than one eligible ULIPs and the aggregate of the amount of premium payable on such eligible ULIPs does not exceed Rs 2,50,000 for any of the previous years during the term of such eligible ULIPs, such consideration shall be eligible for exemption under the said clause (10D);

If the assessee has received consideration, during the current previous year, under more than one eligible ULIPs and the aggregate of the amount of premium payable on such eligible ULIPs exceeds Rs 2,50,000 for any of the previous years during the term of such eligible ULIPs, the consideration under only such eligible ULIPs shall be eligible for exemption under the said clause (10D) where an aggregate of the amount of the premium payable does not exceed Rs 2,50,000 for any of the previous years during their term.

Consideration has been received by the assessee under any one or more eligible ULIPs during any previous year preceding the current previous year and it has been claimed to be exempt under clause (10D) of section 10 of the Act. Such eligible ULIPs are referred to as “Old ULIPs” in this paragraph and corresponding examples and references to eligible ULIPs shall not include old ULIPs. The exemption under clause (10D) of section 10 of the Act shall be determined.

CIRCULAR NO: 2 of 2022

DATE: 19th January, 2022

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