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Note on section 10(10D) of the Income-tax Act, 1961 (Act) with respect to Unit Linked Insurance Policy (ULIP) as amended by Finance Act, 2021

In Unit Linked Insurance Policy, the Investment Risk in investment portfolios is borne by the Policyholder

As per the provisions of section 10(10D) of the Income-tax Act, 1961 (Act), no exemption shall be available on any sum received under a life insurance policy, issued on or after 1 April 2012, where the premium payable for any of the previous year during the term of the policy exceeds 10 per cent of the actual capital sum assured.

Under the existing provisions of section 10(10D) of the Act, there is no cap on the amount of annual premium being paid by person during the term of the policy.

The Finance Act, 2021 amended section 10(10D) of the Act to provide that no exemption shall be available to any unit linked insurance policy (ULIP) issued on or after 1 February 2021 if the amount of premium payable for any of the previous year during the term of the policy exceeds Rs 2,50,000. As per the Amended fifth proviso to section 10(10D) of the Act, in case of multiple ULIPs issued on or after 1 February 2021, exemption under section 10(10D) shall be available only with respect to such policies aggregate premium whereof does not exceed Rs 2,50,000 for any of the previous years during the term of any of the policy.