How Capital Gains Are Calculated in ULIP Plan?

Union Budget 2023 has recently brought ULIP Capital Gains Tax under the purview of the Income Tax Regime from FY 2022-23 (AY 2023-24). Unit Linked Insurance Plan (ULIP) is a life insurance scheme that has become one of the best investment options with high returns in India in 2023.

Read more
Best ULIP Plans
  • Guaranteed Tax Savings

    Guaranteed Tax Savings

    Under sec 80C & 10(10D)
  • savings

    ₹1 Crore

    Invest ₹10k Per Month*
  • Zero LTCG Tax

    Zero LTCG Tax

    Unlike 10% in Mutual Funds

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply

Top performing plans with High Returns*

Invest ₹10K/month & Get ₹1 Crore returns*

We don’t spam
View Plans
Please wait. We Are Processing..
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company
Get Updates on WhatsApp
We are rated
58.9 million
Registered Consumers
26.4 million

Let us learn in this article how capital gains are calculated in ULIP Plans.

What is a ULIP Plan?

The best ULIP Plans provide you with life coverage benefits along with good investment returns and various tax benefits.

Key Features of a ULIP Plan are as follows:

  • Insurance coverage during your lifetime

  • A part of the premium is invested in market-linked equity, debt, or hybrid mutual funds

  • Earns high returns on your investment

  • Sum Assured is given to the nominee in your absence

  • 5-year lock-in period on investment fund

  • Tax benefits on premiums paid u/ Section 80C of the IT Act, 1961

  • Income tax deduction on the maturity returns u/ Section 10(10D) of the IT Act, 1961

What is Capital Gains Tax?

Central Government levies tax on the profits earned from the sale of movable and immovable (e.g. building, land, gold, and mutual funds) capital assets after holding them for a specific time. This tax levied on your capital assets gains is known as Capital Gains Tax. 

The types of Capital Gains Tax are as follows:

  • Long-term Capital Gains Tax: This capital gains tax is levied when you sell your capital assets after holding them for a long term (more than 36 months).

  • Short-term Capital Gains Tax: This tax is levied on capital gains after holding your assets for a short term (36 months or less).

What is ULIP Capital Gains Tax?

Let us understand the meaning of ULIP Capital Gains Tax from the points mentioned below:

  • You may earn profits when you sell your equity-linked mutual fund assets of the ULIP Plan after a period

  • The government levies a ULIP Capital Gains Tax on the gains earned from the sale of such capital assets

  • Concerning ULIPs, you need to pay a Long Term Capital Gain (LTCG) Tax if you sell your assets after holding them for 1 year or more

  • No tax is charged in case of the demise of the policyholder

Important features of ULIP Capital Gains Tax:

Features Details
LTCG Tax on ULIPs before 1st Feb 2021 Exempted
LTCG Tax on ULIPs after 1st Feb 2021 Levied u/ Sec 112 of the IT Act, 1961
Premium Limit for ULIP Capital Gains Tax Yearly ULIP premium is Rs. 2.5 lakhs or more
Capital Gains Limit LTCG Tax is levied if gains of Rs. 1 lakhs & Above
LTCG Tax Rate 10% of LTCG

ULIP Capital Gains Tax Calculation

Let us learn how you can calculate ULIP Capital Gains Tax with the help of examples. This will help you get an early idea of your income tax payment.

  1. Example 1: 

    If you buy a ULIP Plan with the terms given in the table below, let us calculate your ULIP capital gains tax:

    Parameters Details
    Premium Rs. 1.5 lakhs
    Policy Term (PT) 20 years
    Profits from selling ULIP funds at the end of PT Rs. 90,000
    LTCG Tax charged
    • NIL
    • Premium is less than Rs. 2.5 lakhs limit, and
    • LTCG gains are less than Rs. 1 lakh
  2. Example 2:

    Parameters Details
    Premium Rs. 1.5 lakhs
    Policy Term (PT) 20 years
    Profits from selling ULIP funds at the end of PT Rs. 3 lakhs
    LTCG Tax charged
    • NIL
    • Annual premium is less than Rs. 2.5 lakhs
  3. Example 3: 

    Parameters Details
    Premium Rs. 3 lakhs
    Policy Term (PT) 20 years
    Profits from selling ULIP funds at the end of PT Rs. 90,000
    LTCG Tax charged
    • NIL
    • LTCG gains are less than Rs. 1 lakh
  4. Example 4: 

    If your capital profits are higher than the income tax provisions limit, then the ULIP capital tax calculation:

    Parameters Details
    Premium Rs. 3 lakhs
    Policy Term (PT) 20 years
    Profits from selling ULIP funds at the end of PT Rs. 5 lakhs
    Capital Gains Above the Provisional Limit Rs. 5 lakhs- Rs. 1 lakhs
    = Rs. 4 lakhs
    LTCG Tax charged 10% of 4 lakhs
    = Rs. 40,000

In Closing

This article details how capital gains on ULIPs are calculated in advance of paying the income tax amount. It will also help you in ULIP Returns calculation, which is an important factor to decide the best ULIP Plan.


  • Are ULIP gains tax-free?

    The profits earned from selling mutual funds under your ULIP Plan are charged with Long-Term Capital Gains (LTCG) Tax at the rate of 10%.
  • How to calculate returns from ULIP Plan?

    The gains earned over the limit of Rs. 1 lakh is charged at a 10% rate for the calculation of ULIP Capital Gains Tax. This tax is payable if your annual premiums for insurance policies are more than Rs. 2.5 lakhs. 
  • How is tax treated on the maturity of ULIP?

    The maturity returns of the ULIP Plan are charged with Long Term Capital Gains Tax if the total gains are less than Rs. 1 lakhs and the total annual premiums paid are up to Rs. 2.5 lakhs.
  • Is ULIP tax-free after 5 years?

    The maturity returns or surrender of the ULIP Plan at the end of the lock-in period is tax-free if the annual premium payment is less than Rs. 2.5 lakhs.

Grow your wealth & meet your Financial goals

Systematically Invest in high growth plans with returns upto 18%*
View plans
Standard T & C Apply*
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Invest more get more
capital guarantee
Investment Calculator
  • One time
  • Monthly
/ Year
Sensex has given 10% return from 2010 - 2020
You invest
You get
View plans

Ulip plans articles

Recent Articles
Popular Articles

11 May 2023

As a policyholder of SBI ULIP, you can easily manage
Read more
Bajaj Allianz ULIP Login

11 May 2023

The Bajaj Allianz ULIP Login is an online service feature that
Read more
4G ULIPs vs Mutual Funds

07 Apr 2023

Investing in financial instruments is an essential part of
Read more
What is NAV in ULIPs?

28 Mar 2023

ULIPs offer the dual benefit of life coverage and investments
Read more
ULIP Plans for Child Education

16 Mar 2023

In a world full of uncertainties, securing the future of
Read more
ULIP Calculator
A ULIP calculator is a specifically developed tool which helps the insurance buyers to calculate the premium
Read more
7 Things to Know About the Tax Benefits of ULIPs
Nowadays, Unit Linked Insurance Plans, i.e., ULIPs, have evolved as the popular income tax saving investment
Read more
ULIP Fund Returns
ULIP or Unit Linked Insurance plan  provides a combined benefit of investment and life cover. According to the
Read more
SBI Life Smart Privilege Plan: Benefits & Features
SBI Life Smart Privilege is a unit-linked, non-participating life insurance plan offered by SBI Life Insurance
Read more
11 ULIP Charges You Should Know About
Unit-Linked Insurance plan (ULIP) offers dual benefits of insurance and investment. Unlike traditional insurance
Read more

  • Zero% commission
  • No hidden charges
  • Expert Advice
  • 100% calls recorded
Invest ₹10k/month Get ₹1Cr
Tax free on maturity*
Mobile +91
*T&C Applied.
Download the Policybazaar app
to manage all your insurance needs.