A unit linked investment plan (ULIP) is one of the popular investment choices as it offers the dual benefits of wealth creation along with the protection and security of loved ones. With systematic and regular investments, your money grows steadily which can help achieve long-term goals like buying your own house, your child’s education, retirement planning and more. It is essential to know the tax^* benefits of the investment too. This will allow you to reap all its benefits.

Here is how your investment in a ULIP is taxed.

For ULIPs purchased after April 1, 2012

If you purchase a ULIP after April 1, 2012, you can claim a deduction under Section 80C^* of the Income Tax Act, 1961 provided the premium paid towards your plan is not more than 10% of the total sum assured. The amount on maturity is also tax-exempt subject to conditions under Section 10(10D)^*.
However, if the premiums paid are more than 10% of the total sum assured of the plan, the deduction is applicable only up to 10% of the total sum assured. In this case, the amount received at maturity is also taxable.

For ULIPs purchased before April 1, 2012

If you purchased a ULIP before April 1, 2012, you can claim a tax deduction under Section 80C^* of the Income Tax Act, 1961 provided the premium paid towards your plan is not more than 20% of the total sum assured. The amount on maturity is also tax-exempt under Section 10 (10D)^* in this case.
However, if the premiums paid is more than 20% of the sum assured, you can claim a tax deduction on the amount equivalent to 20% of the sum assured only. Under these circumstances, the amount received at maturity is also taxable.

At maturity

As stated above, the amount received at maturity of your ULIP is exempt from tax if conditions mentioned in Section 10(10D)^* of the Income Tax Act, 1961 are fulfiled.