1Is ULIP maturity tax-free?
Yes, within conditions — exempt under Section 10(10D) if the premium is within the prescribed percentage of the sum assured. But high-premium ULIPs (annual premium over Rs 2,50,000) are taxed as capital gains.
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ArticleULIPs combine insurance with investment, and their tax treatment changed for high-premium policies. Knowing where your ULIP falls decides whether the proceeds are tax-free. Here's how ULIPs are taxed.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
ULIP maturity is tax-free within conditions, but high-premium ULIPs (annual premium over Rs 2,50,000) are taxed as capital gains. Here's how.
For most policies, the maturity proceeds of a ULIP are exempt under Section 10(10D), provided the premium stays within the prescribed percentage of the sum assured. This exemption is a key attraction of ULIPs for long-term savers.
Regardless of premium size, the death benefit paid to nominees generally remains exempt — the high-premium rule affects the investment/maturity proceeds, not the life-cover payout on death.
Because high-premium ULIPs are now taxed like equity funds but with insurance charges layered in, many investors find a term plan plus ELSS or mutual funds more efficient. Use a ULIP if you specifically want the bundled product and stay mindful of the Rs 2,50,000 threshold.
Yes, within conditions — exempt under Section 10(10D) if the premium is within the prescribed percentage of the sum assured. But high-premium ULIPs (annual premium over Rs 2,50,000) are taxed as capital gains.
As capital gains, similar to equity mutual funds , where the annual premium exceeds Rs 2,50,000 for policies issued after the relevant date. The maturity is no longer exempt in that case.
Yes — within the Rs 1,50,000 limit in the old regime , subject to the premium being within the prescribed proportion of the sum assured.
Holding or considering a ULIP? Write to the firm and we'll check the Rs 2.5 lakh threshold and the tax on your proceeds.