Tax Benefits of Investing in ULIPS

We work hard day in and out to strengthen our financial situation. Investing in good policy plans is beneficial as it ensures long term financial security. By making investments, we also make money work hard for us. A penny saved is a penny earned!

UnitLinked Insurance Plans (ULIPs) are investment vehicles having a lock-in period of 5 years. They serve as an optimum wealth creation solution. ULIPs offer investors insurance and an investment opportunity under one umbrella. The premium amount of ULIP is split into two parts as per the policyholder’s preference.

One part of the premium is invested as a life insurance cover to the policyholder. The other part of the premium is invested in securities like stocks, mutual funds or bonds.

ULIPs offer you a twofold advantage. They help you save taxes while paying the premium and even after the policy has matured.

Why should one invest in ULIPs?

As mentioned above, ULIP is a unique blend of a life insurance policy and an investment option for accomplishing your long-term financial goals. As an investor, you wish to save money for your children’s education, their marriage or even for your retirement. ULIPs are a perfect amalgamation of these objectives.

Read on to find out how ULIPs are a propitious investment:

1. Tax benefit on premium amount 

The premium amount paid in ULIP is allowed as a deduction under Section80C. The least among the two will be considered as a deduction:

• up to 10% of sum assured;
• premium amount         

The premium amount paid in ULIP Retirement plan can be claimed as a deduction under Section 80CCC.

Note:  As per the Income Tax Act, the combined maximum deduction under Section 80C, Section 80CCC and 80CCD(1) is up to Rs 1,50,000. Even though you invest a higher amount, a deduction can be claimed only up to Rs 1,50,000.

Example 1: If the sum assured is Rs 15,00,000 and the premium amount paid is less than 10%, let’s consider Rs 1,00,000, a policyholder can claim the entire premium as a deduction u/s 80C.

Example 2: If the sum assured is Rs 15,00,000 and the premium amount paid is more than 10%, let’s consider Rs 2,50,000 a policyholder can claim a maximum deduction up to 10%, i.e. Rs 1,50,000 only.

2. Exemption on withdrawal 

Withdrawal of policy amount can take place in the following cases:

• Death of policyholder
• Partial withdrawal of policy amount 
• Maturity of the policy 

Policy amount withdrawn on the event of the death of the policyholder is completely tax-free.

As per Section 10(10D) for life insurance policy, if the premium amount is below 10% of the sum assured, the amount received on partial withdrawal/maturity is exempt. 

If you have taken a policy before 1^st April 2012, and the premium amount is below 20% of sum assured, the amount received on partial withdrawal/maturity is exempt.

Note: If the amount payable by you exceeds 10%/ 20% of sum assured, the amount received at the time of maturity will be taxed under “Income from other Sources”.

3. Benefit of Retirement ULIP/Pension ULIP:

1/3^rd of the entire amount can be withdrawn by the policyholder. This is termed as commuted pension, and the amount will be tax-free as per Section 10(10A). The remaining amount can be received in annuity installments.

4. Other Benefits of Investing in ULIPs:

• ULIPs offer policyholders a variety of high, medium and low-risk investment options under one single policy. Investors have the freedom to select any option as per their interest.
• ULIPs offer investors a partial withdrawal after the first 5 years from their Unit Linked Account.
• Being a long-term systematic investment option, ULIPs enable investors to invest money in small chunks regularly.

Thus, by investing in ULIPs, you can gain tax benefits and achieve your long-term financial goals.But you might fail to claim the tax benefits in the absence of proper knowledge and procedures. So, you should take help of tax experts for this job.We have a team of in-house tax experts who can accurately file your tax returns online while giving you maximum tax benefits.

Tax Implications On Diwali Gifts

Gifts and dopamine go hand in hand. They’re like two sides of the same coin. Receiving gifts has always made us happy since our childhood, which, technically speaking, is mainly concerned with the release of dopamine - the happy hormone.


Now when Diwali is around the corner, our family and friends are undeniably going to shower us with gifts. It can be in cash or kind, which is further divided into immovable and movable. The former one is real estate, and the latter one includes vehicles, jewelry, etc.


But what most of us don’t know is that gifts in either form are taxed under the head “Income From Other Sources”. As per The Income Tax Act, 1961, the receiver of the gift is liable to pay tax on them. Worried? Fret not! Read further to know the tax implications for giving and receiving gifts.


1.Cash as gift

There is one basic rule regarding cash as a gift. It is tax exempted up to Rs 50,000, but if it even exceeds a penny, then it will be fully taxable. So, if your aunt gives you a Diwali gift of Rs 55,000, you will be liable to pay income tax on it.

2.Gifting in kind

Apart from cash, gifts in kind also come with a tax liability. As mentioned earlier, it is of two types – movable & immovable.

“Movable property” includes objects such as vehicles, jewelry, stocks, etc. things that are physically transferrable. The concept of Fair Market Value (FMV) comes into the picture here. The FMV of the gift should not exceed Rs 50,000 for it to be tax-free.


When it comes to gifts which fall under the category of immovable property, you must know the concept of Stamp Duty Value (SDV). It is the value which has been adopted by the stamp valuation authorities to come to the stamp duty figure. Even here, the rule of Rs 50,000 applies. If the SDV exceeds this number, the gift will be taxed.

3.Exceptions

Now here’s the catch! Just like all the laws in India, The Income Tax Act, 1961 also has many exceptions. Focusing on the ones for gift tax, gifts received from family (parents, spouse, siblings, etc.) be it any amount whatsoever are tax-free! Also, gifts received on marriage, irrespective of the donor, are all tax-free!

4.Even the donor needs to pay tax

There are certain rare circumstances where even the donor needs to pay tax on the gift he has given. There is a concept of “clubbing of income” under the Income Tax Act where such a situation arises. Let us understand this with the following example:

A husband gifts his wife (a housemaker) cash amounting to Rs 5,00,000. She keeps that amount as an FD in her account. So, there is interest income generated on that FD for the wife. This income would be clubbed with the husband’s income as the wife doesn’t have any income of her own. Hence, the donor is paying tax on the gift!

So, from next time take note of which gifts you receive and from whom, as you might be taxed on them!