Offering tax-saving and wealth-building, ULIPs with life insurance and market-linked investment are a good option for returns
ULIPs with annual premiums above ₹2.5L are now taxed at 12.5% LTCG post 1 year. Policies before Feb 2021 stay tax-exempt under Sec 10(10D).
ULIPs now align with equity mutual funds in tax treatment; insurers are expected to offer better plans, lower charges, and competitive returns.
As investment tools, ULIPs have come a long way in the past decade. They have become more and more popular as tax-saving tools. With the introduction of the LTCG in 2019, they came to the forefront. Budget 2025 has made ULIP investors wary about this popular tax-free investing option. The large tax benefit of section 10(10D) of the Income Tax Act, along with the chance to earn a better return through equity investment, has been the most convincing reason for investors to choose ULIPs. What is it that makes ULIPs work and what can you expect from them? Let’s find out.
ULIPs are tax-saving tools which help you invest as well as secure your family, all with one single plan. A part of the premium paid regularly is invested in funds selected as per your risk appetite, and the other part is utilized for a life cover. This makes them neither pure insurance plans nor pure investments, but hybrid products.
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The ULIPs with annual premiums over ₹2.5 lakhs are taxable from February 1, 2021. They incur a 12.5% LTCG tax when redeemed after one year. Previously, the high premium ULIPs were taxed under Capital Gains, while lower premium ULIPs were taxed as income from other sources, if they were more than 10% of the death sum assured. The budget 2025 requires all non-exempt ULIPs to be taxed under Capital Gains, reducing the tax burden on minor policies.
Moreover, as per the budget 2025, the ULIPs with premiums less than Rupees 2.5 lakhs will incur a tax of 12.5% LTCG after a year. The LTCG exemption of up to Rupees 1.25 lakh annually will also apply, thus affecting individuals using ULIPs for tax savings.
We have all read about the global economic slowdown arising due to the pandemic. India will also be affected sooner or later. Markets will change and investors will be worried. At such a time, a ULIP can be a saving grace as it allows great flexibility in terms of switching between equity or debt oriented and balanced funds. You can easily bring your investments back on track if either of the categories isn’t performing well.
Further, the combination of insurance and market investment with ULIP makes them a considerable option. It offers protection from a volatile market while also building long-term wealth. The tax benefits and clarity, as mentioned above, also contribute to achieving financial goals.
Here are 6 tips to buy the best ULIP in India.
ULIP maturity benefits are taxed at 10% as LTCG if the annual premium is above ₹2.5 lakh, but death proceeds remain tax-free.
Source: India Today
The reasons for growing popularity of ULIPs are as follows:
If you’re looking for a plan that balances stability with smart long-term growth, the iSelect Guaranteed Future Plus by Canara HSBC Life Insurance is worth considering. It offers guaranteed benefits along with flexible options to customise your savings plan based on life goals. So, be it about building a corpus for retirement, your child’s education, or legacy planning, this plan can be your pick.
Key features include:
Return of mortality charges, adding back to your overall returns
Loyalty additions and wealth boosters to grow your corpus
Guaranteed benefits tailored to your chosen premium term and payment mode
Flexibility in choosing the policy term, premium payment frequency, and benefit payout mode
As we move through 2025, ULIPs continue to evolve as a smart and flexible investment option. They come with market-linked returns and also tax advantages.
The iSelect Guaranteed Future Plus by Canara HSBC Life Insurance is a strong contender for investors who want predictability, long-term savings, and life cover all bundled into one robust plan.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
Canara HSBC Life Insurance offers online ULIP plans that blend life insurance protection with investment growth, helping you build wealth while securing your family's future.
