Section 10(10D) of the Income Tax Act, 1961, lays down rules for taxation of life insurance policy proceeds received on maturity or death of the policyholder. Generally, death and maturity benefits are exempted from tax.
Future Generali Big Dreams Plan, a unit linked insurance plan (ULIP), offers section 80C and section 10(10D) tax benefits to investors. Under this plan, you can reduce your taxable income by up to ₹ 1.5 lakh a year. Also, the sum received on maturity or death of the policyholder is tax free.
Let’s take a quick look at them and understand the factors that affect tax on ULIP returns. We’ll also learn how you can derive section 10(10D) tax benefits by investing in Future Generali Big Dreams Plan.
How are ULIP returns taxed?
ULIPs purchased before April 1, 2012: If you have purchased a ULIP before April 1, 2012, you can only claim Section 80C deductions and section 10(10D) tax benefits if your annual premium amount is less than or equal to 20% of the sum assured.
ULIPs purchased after April 1, 2012: If you have bought a ULIP or any other traditional insurance plan after April 1, 2012, the annual premium paid in any year should not be more than 10% of the sum assured to be eligible for section 80C and section 10(10D) tax benefits.
With Future Generali Big Dreams Plan, you can enjoy exemption of tax on ULIP returns on maturity on the sum assured, bonus received, and loyalty additions if you fulfil the above conditions.
Future Generali Big Dreams Plan helps you grow your wealth and at the same time secures the financial future of your family with life insurance coverage. Unlike a traditional insurance plan, you can withdraw money partially from your ULIP fund after 5 years. You can also enjoy benefits such as loyalty additions where units are added automatically to your ULIP fund and switch funds to optimize your investment.
Points to remember
Investors should also be aware of the following rules that impact tax on ULIP returns and proceeds from other life insurance policies.
- ULIP plan must be continued for at least 5 years to claim 80C deductions
- If returns are exempted under section 10(10D), then they are also subject to 2% TDS deductions
- Any amount paid as ULIP premium can be claimed for tax deductions. The only condition is that the premium amount should be less than or equal to 10% of the sum assured
- Premium has to be paid by cheque or online mode