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ULIP Taxation

The Indian government introduced significant changes in ULIP taxation rules in the Finance Act 2021. The amendments made under Sections 80C... Read more and 10(10D) transformed the taxation on ULIP for policies purchased after 2021. You should be aware of how the latest ULIP plan taxation work to ensure optimal tax benefits2. Understanding the rules before investing can protect your money and your tax benefits. Read Less

The Indian government introduced significant changes in ULIP...Read more taxation rules in the Finance Act 2021. The amendments made under Sections 80C and 10(10D) transformed the taxation on ULIP for policies purchased after 2021. You should be aware of how the latest ULIP plan taxation work to ensure optimal tax benefits2. Understanding the rules before investing can protect your money and your tax benefits. Read Less

Invest ₹20,000/month¹, Get ₹4.4 Cr tax-free² returns (@21.54%)

All funds rated 4 or 5 stars³

Wealth creation + Life cover

Zero LTCG tax²

Zero premium allocation charge

In this policy, the investment risk in investment portfolio is borne by the policyholder

¹IIllustrative returns @4%: ₹46.8 Lakh | @8%: ₹78 Lakh. Policy Term 20 years.
Past performance is not indicative of future performance. The linked insurance product do not offer any liquidity during the first five years of the contract. The policy holder will not be able to surrender/withdraw the monies invested in linked insurance products completely or partially till the end of the fifth year

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₹11,99,016

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₹34.57 Lakh

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₹70.50 Lakh

@20.37%

Additional Benefits

Life Cover (including Terminal Illness Cover): ₹22.8 Lakh

Accidental Death Cover: ₹11.43 Lakh

Accidental Total & Permanent Disability: ₹11.43 Lakh

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Tata AIA Premier SIP is a combination of the Tata AIA Smart SIP - Non-participating, Unit-linked, Individual Life Insurance Savings Plan (UIN: 110L174V02) and Tata AIA Health Buddy - Non-participating, Non-Linked, Individual Health Product (UIN:110N183V01). Both Tata AIA Smart SIP and Tata AIA Health Buddy are also available for sale individually. Product option: Future Secure

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Understanding taxations in ULIP

The taxation of ULIPs is based on several factors, including the premium amount, date of issuance of the policies, the number of policies owned, and the payout type, which may be maturity, surrender, or death benefits.

Premium payments made towards insurance can be eligible for taxation in terms of the deductions allowed in Section 80C of the Income Tax Act, 1961, not exceeding ₹1.5 lakhs. While the maturity amount may be exempted in terms of Section 10(10D), subject to terms and conditions, the death benefit amount gets fully exempted.

Earlier, ULIP policy taxation allowed full tax exemption for maturity proceeds if premiums stayed within specified limits. However, from 1 February 2021, taxation of ULIP plans changed. ULIPs with annual premiums exceeding ₹2.5 lakh now attract capital gains tax, aligning ULIP taxation with mutual fund taxation, while retaining tax-free² death benefits.

What is a ULIP?

A unit-linked insurance plan is a type of life insurance product that comes with a market-based investment option. Under this plan, a part of the premium goes towards securing life insurance protection, while the remaining premium is invested in equity, debt, or balanced funds. This structure allows wealth creation alongside financial protection within a single plan.

Popular Tata AIA Investment Plans

Solution Composition

Premier SIP is designed for combination of Benefits of two individual and separate products named (1) Tata AIA Life Insurance Tata AIA Smart SIP - Non-participating, Unit-linked, Individual Life Insurance Savings Plan (UIN: 110L174V02) and (2) Tata AIA Health Buddy - Non-participating, Non-Linked, Individual Health Product (UIN:110N183V01). Product option: Future Secure These products are also available for sale individually without the combination offered/suggested.

Tata AIA

Premier SIP

Multicap fund delivered 23.21% returns (Benchmark:16.65%)⁴
All funds rated 4 or 5 stars³by Morning⁵
Payouts are tax² exempted

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Solution Composition

Param Raksha Life Pro+ is designed for combination of Benefits of two individual and separate products named (1) Tata AIA Smart Sampoorna Raksha Supreme Unit Linked, Non-Participating Individual Life Insurance Plan (UIN: 110L179V02) and (2) Tata AIA Health Buddy, Non-Participating, Non-Linked, Individual Health Product (UIN: 110N183V01). These products are also available for sale individually without the combination offered/suggested.

Tata AIA

Param Raksha Life Pro +

Multicap fund delivered 23.21% returns (Benchmark:16.65%)⁴
All funds rated 4 or 5 stars³ by Morningstar⁵
Get terminal illness cover with Term booster⁶ + high life cover

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Types of Taxes and Deductions for ULIPs

The following are the types of taxes and deductions for ULIP plans:

Tax treatment during maturity or withdrawal

Taxation on ULIP plans at maturity depends on premium thresholds and policy issue dates. Policies issued after February 1, 2021, with annual premiums above ₹2.5 lakh attract capital gains tax, while compliant policies retain Section 10(10D) exemption.

Tax rules for older ULIP policies

Taxation of ULIP policy purchased on or before March 31, 2012, allowed Section 80C deductions when premiums stayed within 20% of the capital sum assured. The conditions were more relaxed compared to later regulations.

Premium deduction eligibility conditions

ULIP plan taxation for policies issued after April 1, 2012, restricts Section 80C deductions when annual premiums exceed 10% of the capital sum assured, applying to most active policies.

Tax status of death benefits

Taxation on ULIP policy death proceeds remains fully exempt under Section 10(10D), irrespective of premium size, policy issue date, or sum assured ratios.

Maturity benefits

ULIPs purchased before February 1, 2021, continue to get tax-free maturity proceeds, even for higher premiums, provided earlier ratio rules are met.

What are the ULIP tax benefits?

ULIP offers various tax benefits, some of which are as follows:

Premium relief under Section 80C

Premiums paid toward a ULIP plan qualify for deductions up to ₹1.5 lakh per year under Section 80C. This lowers taxable income while promoting disciplined savings.

Tax-free death proceeds

Under Section 10(10D), death benefits from a ULIP policy are paid to nominees without any tax liability, covering both the sum assured and accumulated fund value.

Long-term wealth support

A ULIP plan provides investment growth with yearly tax relief, supporting structured wealth creation across the policy term.

ULIP taxation rules and implications

The taxation rules and implications of ULIP are as follows:

Taxation on ULIP allows premium deductions under Section 80C within prescribed limits, reducing taxable income during the policy term.

Taxation of ULIP plans permits maturity exemption under Section 10(10D) if annual premiums remain within ₹2.5 lakh for post-2021 policies.

ULIP taxation mandates capital gains tax on maturity proceeds for high-premium ULIPs exceeding statutory limits.

Death benefits under the ULIP policy taxation remain fully exempt, ensuring uninterrupted transfer to nominees.

Surrender or withdrawal before meeting Section 10(10D) conditions attracts capital gains taxation, with applicable TDS under Section 194DA.

ULIP Tax Planning Strategies

One can consider the following tax planning strategies while making ULIP payments:

Optimize Section 80C

Plan ULIP premiums within the ₹1.5 lakh Section 80C limit to balance insurance cover with tax savings across the policy term.

Preserve maturity exemption

Keep annual premiums within ₹2.5 lakh for post-2021 policies and follow sum-assured ratios for older plans to retain tax-free maturity benefits.

Smart fund switching

ULIPs allow movement between equity and debt funds without capital gains tax, supporting portfolio adjustment without added tax cost.

Conclusion

ULIPs follow a structured tax framework that links deductions, exemptions, and capital gains rules to premium size and policy timing. Knowing ULIP plan taxation norms helps investors align insurance needs with investment goals while managing taxation of ULIP policy payouts wisely. With awareness of deductions under Section 80C and exemptions under Section 10(10D), ULIPs can be a way for long-term financial planning.

Are ULIP premiums eligible for tax deduction?

Yes. ULIP premiums qualify for tax deduction under Section 80C up to ₹1.5 lakh yearly. For policies issued after April 1, 2012, the premium must be 10% or less of the sum assured.

What happens if I surrender my ULIP before 5 years?

If surrendered before five years, earlier deductions under Section 80C are reversed. The surrender value becomes taxable after completion of the lock-in period.

Are partial withdrawals taxable?

If maturity is tax-exempt, partial withdrawals after 5 years are usually tax-free. If the ULIP is high-premium and taxable, withdrawals become taxable on gains.

Is the maturity amount from ULIPs taxable?

If Section 10(10D) conditions are not met, long-term capital gains are taxed at 12.5%, with an annual exemption of up to ₹1.25 lakh.

What is the lock-in period for ULIP?

ULIPs carry a five-year lock-in from policy start. Withdrawals or surrender after this period incur tax when Section 10(10D) rules are not met.

The linked insurance product do not offer any liquidity during the first five years of the contract. The policy holder will not be able to surrender/withdraw the monies invested in linked insurance products completely or partially till the end of the fifth year.
Premier SIP is designed for combination of Benefits of two individual and separate products named (1) Tata AIA Life Insurance Tata AIA Smart SIP - Non-participating, Unit-linked, Individual Life Insurance Savings Plan (UIN: 110L174V02) and (2) Tata AIA Health Buddy - Non-participating, Non-Linked, Individual Health Product (UIN:110N183V01). Product option: Future Secure These products are also available for sale individually without the combination offered/suggested.
Param Raksha Life Pro+ is designed for combination of Benefits of two individual and separate products named (1) Tata AIA Smart Sampoorna Raksha Supreme Unit Linked, Non-Participating Individual Life Insurance Plan (UIN: 110L179V02) and (2) Tata AIA Health Buddy, Non-Participating, Non-Linked, Individual Health Product (UIN: 110N183V01). These products are also available for sale individually without the combination offered/suggested.
If your policy offers variable benefits, then the illustrations on this page will show two different rates of assumed future investment returns. Currently the gross investment returns are stipulated as 4% p.a. and 8% p.a. These assumed rates of return are not guaranteed, and these are not the upper or lower limits of what you might get back, as the value of your policy is dependent on a number of factors including actual future investment performance.
¹Illustration shows a monthly premium of ₹20,000 for Tata AIA Premier SIP for a 25-year-old male, standard life, premium payment term: 15 years, policy term: 20 years in Future Secure plan option. 4% and 8% are assumed rates of return. 23.21% is the 5-year return of Multicap fund as of December'25. Maturity amount: ₹46,85,557 at 4% returns, ₹78,09,599 at 8% returns and ₹4,47,73,357 at 21.54% returns. The fund value calculation is done by projecting the past returns of Multicap Fund after adjusting for all expenses in Tata AIA Premier SIP The above values have been calculated assuming 23.21% p.a. gross investment returns, which is the past 5-year return of Multicap fund as of December'25.
Some benefits are guaranteed, and some benefits are variable with returns based on the future performance of your insurer carrying on life insurance business. If your policy offers guaranteed benefits, then these will be clearly marked “guaranteed’ in the illustration table on this page. If your policy offers variable benefits, then the illustrations on these pages will show two different rates of assumed future investment returns. Currently the gross investment returns are stipulated as 4% p.a. and 8% p.a. These assumed rates of return are not guaranteed, and these are not the upper or lower limits of what you might get back, as the value of your policy is dependent on a number of factors including actual future investment performance.
²No Goods and Service Tax shall be applicable on Individual life insurance products as per prevailing laws. Tax laws are subject to amendments from time to time. If any imposition (tax or otherwise) is levied by any statutory or administrative body under the Policy, Tata AIA Life Insurance Company Limited reserves the right to claim the same from the Policyholder.
³All funds open for new business which have completed 5 years since inception are rated 4 or 5 Star by Morningstar as of August 2025.
⁴5-year computed NAV for Multi Cap Fund as of November 2025. Other funds are also available. Benchmark of this fund is S&P BSE 200.

⁵©2025 Morningstar. All rights reserved. The Morningstar name is a registered trademark of Morningstar, Inc. in India and other jurisdictions. The information contained here: (1) includes the proprietary information of Morningstar, Inc. and its affiliates, including, without limitation, Morningstar India Private Limited (“Morningstar”); (2) may not be copied, redistributed or used, by any means, in whole or in part, without the prior, written consent of Morningstar; (3) is not warranted to be complete, accurate or timely; and (4) may be drawn from data published on various dates and procured from various sources and (5) shall not be construed as an offer to buy or sell any security or other investment vehicle. Neither Morningstar, Inc. nor any of its affiliates (including, without limitation, Morningstar) nor any of their officers, directors, employees, associates or agents shall be responsible or liable for any trading decisions, damages or other losses resulting directly or indirectly from the information.
⁶The Insured Amount under Terminal Illness with Term Booster option (in Health Buddy) is payable on earlier of death or diagnosis of Terminal illness of the Life Insured. Please refer Terms and Conditions for more details.
Unit Linked Life Insurance products are different from traditional insurance products and are subject to risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. The underlying Fund’s NAV will be affected by interest rates and the performance of the underlying stocks. The fund is managed by Tata AIA Life Insurance Company Ltd. (hereinafter the Company"). The performance of the managed portfolios and funds is not guaranteed, and the value may increase or decrease in accordance with the future experience of the managed portfolios and funds. Past performance is not indicative of future performance. Returns are calculated on an absolute basis for a period of less than (or equal to) a year, with reinvestment of dividends (if any). All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market. Please know the associated risks and the applicable charges, from your insurance agent or the Intermediary or policy document issued by the insurance company.
The fund is managed by Tata AIA Life Insurance Company Ltd. (hereinafter the Company).
Tata AIA Life Insurance Company Limited is only the name of the Insurance Company & the Unit linked insurance product with Tata AIA /Tata AIA Life Insurance as its prefix is only the name of the Unit Linked Life Insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns.
Buying a Life Insurance policy is a long-term commitment. An early termination of the policy usually involves high costs, and the Surrender Value payable may be less than the all the Premiums Paid.
Insurance cover is available under the product. For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
L&C/Advt/2026/Feb/1075