With ULIP gains now taxable beyond a limit, stick to low-cost policies

Stick to low-cost policies; go with an insurer having a solid track record

In Union Budget 2021-22, the finance minister took away Section 10 (10D) tax exemption from unit-linked insurance plans (ULIPs) whose annual premium exceeds Rs 2.5 lakh. Such policies will now be taxed at 10 per cent at maturity. The purpose behind providing this benefit is to encourage smaller customers buy insurance. But many of these high-premium ULIPs are primarily investment products with only a thin wrapping of insurance.
 

Now, the tax treatment of high-value ULIPs will be on a par with that of other investment products, like equity mutual funds (MFs). “Investment-oriented products should be treated on a par. If