ULIPs may not be attractive!!

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The FM has endorsed AMFI’s proposal on bringing tax parity between mutual funds and ULIPs.

In the budget 2021 presented on 1st Feb 2021, the government has proposed to remove the tax arbitrage that ULIPs enjoy. The government has proposed that investors can get tax benefits in ULIPs only if the annualized premium is less than Rs. 2.50 lakh. So, if an investor invests more than Rs. 2.50 lakh in ULIPs, he will not be eligible to avail exemption on capital gains tax.

However, the budget clearly mentioned that there will be no tax if the policy is premature due to the death of policyholders, whatsoever may be the premium. That means in case of death of the policyholder, even if he/she is paying more than Rs. 2.50 lakh of the annual premium, the death benefit will still remain tax-free.

This new rule is applied only to the ULIPs bought after 1st February 2021. Before this date, ULIP investors are exempted from paying capital gains tax.

There is a sight of confusion in the investors’ lobby as to which product to select. To clear this confusion, it is better to consult an expert for the whole-some approach of investing with a correct understanding of the pros and cons of these products.

Budget 21 OverviewPF taxable from next FY

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