CBDT notifies Rule to compute capital gains on sum received from ULIPs not exempt u/s 10(10D)

Notification No. 8/2022, dated 18-01-2022

The Finance Act, 2021 has inserted sub-section (1B) to section 45 to provide that when a person receives an amount under ULIP, to which exemption under Section 10(10D) does not apply on account of the fourth and fifth proviso thereof, any profits arising from such receipt shall be chargeable to tax under the head capital gains.
Further, the income taxable under head capital gains shall be calculated in such manner as may be prescribed by the board. The Central Board of Direct Taxes (CBDT) has notified Rule 8AD prescribing manner for computation of capital gains for the purpose of section 45(1B). The sum receipt from high premium ULIPs are treated as capital gain in the following manner:

1. Sum received from high premium ULIPs for first time

If the assessee has received the sum from high premium ULIPs for the first time then the capital gains shall be the amount received, including amount allocated by way of bonus, as reduced by the aggregate of premium paid during the term of such policy, till date of receipt of sum from ULIP.

2. Sum received from high premium ULIPs for second time and subsequently

If any sum received from high premium ULIPs isn’t the sum received for first time, then the capital gains shall be the amount which is received by assessee, including amount allocated by bonus, as reduced by:

(a) Amount which already considered as capital gains in any previous year; and
(b) Amount of premium paid during the term of such policy, till date of receipt of sum from ULIP. However, the premiums which are already considered while computing capital gains in Point 1 shall not be taken into consideration.

Click Here To Read The Full Notification