Find out instantly if your ULIP payout is tax-free or taxable, and exactly how much tax you owe — free calculator, no signup.
Free tool to check whether your ULIP maturity or surrender value is tax-exempt under Section 10(10D), or taxable as capital gains under the ₹2.5 lakh premium rule the Finance Act, 2021 brought in. If you're weighing this against gains from other assets, our capital gains tax calculator covers stocks, property, and gold separately.
Enter your policy details below and you'll get an instant answer: exempt or taxable, and if taxable, exactly how much tax you owe.
Last updated: August 19, 2026. Verified for FY 2025-26 (AY 2026-27).
Not professional advice. This is an estimation tool. For anything you're about to file, run it past a Chartered Accountant registered with ICAI first.
A ULIP capital gains tax question always starts the same way. A ULIP (Unit Linked Insurance Plan) bundles life insurance with market-linked investing. Part of your premium buys cover. The rest goes into funds you choose, equity, debt, or a mix. At maturity or surrender, you get the accumulated value.
Whether that payout is taxed depends on two things: your policy's issue date, and how much premium you pay against how much cover you're getting.
Policies issued before April 1, 2012 fall outside the premium-linked tests altogether and stay exempt. For policies issued between April 1, 2012 and January 31, 2021, exemption depends on your annual premium staying within 10% of the sum assured. Policies issued on or after February 1, 2021 face both that 10% test and a separate ₹2.5 lakh annual premium cap. Miss either test, and the gains become taxable as capital gains, not exempt income. Working this out by hand across multiple years and multiple policies gets messy fast, that's the whole reason a calculator like this one helps. If you want to see where a taxable gain would land you overall, run the old vs new tax regime calculator alongside this one.
Section 10(10D) of the Income Tax Act is what makes most life insurance payouts, ULIP proceeds included, tax-free in the first place. It comes with conditions:
This exemption is worth a lot when it applies. Your entire payout, principal plus gains, comes to you tax-free. Fail either applicable test, and you lose it.
This rule came from the Finance Act, 2021, effective February 1, 2021, and only applies to ULIPs issued from that date onward. It sits alongside the older 10% sum-assured test, it doesn't replace it.
Here's the mechanic: if your total annual premium across all post-Feb-2021 ULIPs stays at or under ₹2.5 lakh, and that premium doesn't cross 10% of the sum assured, you keep the Section 10(10D) exemption. Breach either limit in even one year, and the entire gain (maturity value minus premiums paid) becomes taxable as a capital gain, not just the portion above the threshold.
The ₹2.5 lakh cap is an aggregate limit. Two policies, one at ₹1.5 lakh and another at ₹2 lakh, add up to ₹3.5 lakh. You're over the line even though neither policy alone crosses ₹2.5 lakh.
Before this rule, most ULIP investors got automatic exemption once they cleared the older 10% test. Now, high-premium buyers need to check both conditions. When gains are taxable, the rate is either 12.5% (long-term, held more than 12 months, with a ₹1.25 lakh annual exemption) or 20% (short-term), plus a 4% Health and Education Cess on top. Curious how this stacks up against equity LTCG on stocks and mutual funds? Our long-term capital gains calculator walks through that separately, it's usually the first thing people check once they see a taxable result here.
Once you fail the 10% sum-assured test, or your annual premium crosses ₹2.5 lakh on a post-February-2021 policy, the exemption disappears and capital gains tax kicks in.
Capital Gain = Maturity Proceeds − Total Premiums Paid
Long-Term Capital Gain (LTCG): held more than 12 months → first ₹1.25 lakh of gain exempt each year, then 12.5% + 4% Cess on the rest (13% effective on the taxable slice)
Short-Term Capital Gain (STCG): held 12 months or less → 20% + 4% Cess = 20.8% effective rate, no exemption threshold
Example, no gain: You paid ₹3 lakh a year and received ₹12 lakh at maturity after 15 months, with ₹24 lakh paid in total premiums. Capital Gain = ₹12L − ₹24L = −₹12L, treated as zero. No tax.
Example, with gain: Same premiums (₹24 lakh total), but maturity proceeds of ₹35 lakh instead, held 15 months (LTCG). Capital Gain = ₹35L − ₹24L = ₹11 lakh. Subtract the ₹1.25 lakh annual LTCG exemption first: taxable gain = ₹9.75 lakh. Tax = ₹9.75L × 12.5% = ₹1,21,875. Add 4% cess (₹4,875) and total tax comes to ₹1,26,750. Net proceeds = ₹35L − ₹1,26,750 = ₹33,73,250.
A big maturity number doesn't mean a big tax bill. It's the gain over what you actually paid in, minus the annual exemption if it's long-term, that gets taxed. Not the payout itself.
Step 1: Policy details. Your policy issue date decides which exemption tests even apply, whether the ₹2.5 lakh rule kicks in, and whether the 10% sum-assured test kicks in. You'll enter your annual premium (aggregated across all ULIPs, for the year in question), your sum assured, and total premiums paid since the policy started.
Step 2: Maturity or surrender details. Enter the proceeds you actually received and the date you received them. That date, checked against your issue date, determines your holding period and therefore whether it's LTCG or STCG. There's also a checkbox for death benefit claims, since those are always exempt regardless of anything else.
Step 3: Instant results. You'll see your exemption status straight away. If it's taxable, the calculator breaks down the capital gain, the annual exemption applied (for LTCG), the applicable tax rate, tax before cess, cess amount, total tax payable, and net proceeds after tax. Everything runs in your browser. Nothing you enter is stored or sent anywhere.
One thing that catches people off guard: a large one-off capital gain can also affect eligibility for the Section 87A rebate if your total income sits near the threshold. Check that separately with our Section 87A marginal relief calculator before you assume your regular slab still applies.
If you want to check the calculator's logic yourself, here's the sequence it follows:
This isn't hard for one policy and one year. It gets tedious once you're aggregating premiums across multiple ULIPs or checking several years.
Mixing up premium and proceeds. The ₹2.5 lakh rule is about what you pay in annually, not what you get out. You can pay ₹3 lakh a year and still receive ₹50 lakh at maturity. You'd owe LTCG at 12.5% only on the gain over your total premiums (minus the ₹1.25 lakh exemption), not on the full ₹50 lakh.
Forgetting the 10% sum-assured test exists. Most people fixate on the ₹2.5 lakh number and forget there's a second, older test tied to your sum assured. A policy with a low premium can still lose its exemption if that premium is more than 10% of the cover amount.
Treating the limit as a one-time check. It's annual. Pay ₹3 lakh in Year 1 and ₹2 lakh in Year 2, and you lose the exemption entirely (assuming the policy was issued after February 1, 2021), even though Year 2 looks fine on its own.
Forgetting to add up multiple ULIPs. Two policies at ₹1.5 lakh and ₹1.2 lakh, both issued post-Feb 2021, total ₹2.7 lakh combined. That's over the threshold even though each policy individually looks safe.
Getting the holding period wrong by a few days. It runs from issue date to encashment date, checked precisely, not rounded to the nearest month. A policy issued January 15, 2024 and encashed January 16, 2025 has crossed 12 months by a single day, which is enough to flip it from STCG at 20% into LTCG at 12.5%. A few days either side of the 12-month mark can change your tax bracket entirely.
Skipping the cess. A lot of quick calculations stop at 12.5% or 20% and forget the 4% Health and Education Cess. On a large gain, that extra 4% on the tax amount is real money.
If your ULIP was issued before April 1, 2012, it's exempt, no test needed. Issued after that but your premium has stayed within 10% of the sum assured, and (for post-Feb-2021 policies) within ₹2.5 lakh, your maturity proceeds stay tax-free. Fail either applicable test, and the gain becomes taxable as a capital gain.
The calculator tells you instantly whether you're exempt or taxable, what your capital gain works out to, which rate applies, and what you'd actually walk away with after tax. It's a solid starting point for planning. Before you file, run it past a Chartered Accountant, especially if your situation involves multiple policies or a partial withdrawal.
This page works from the Income Tax Act, 1961 (Section 10(10D), Section 45(1B), and Rule 8AD), read alongside CBDT's guidance for FY 2025-26. [VERIFY: The Income Tax Act, 2025 came into force from April 1, 2026, and Section 10(10D) has reportedly been recodified as Schedule II, Clause 2 of the new Act. This page still uses the old section numbers; confirm whether the site should switch to the new Act's numbering for AY 2026-27 content.] Treat the output as a working estimate, not a formal tax assessment or a stand-in for advice from a professional. If your situation involves special exemptions, policy amendments, or several ULIPs stacked together, that's exactly the kind of case a CA needs to look at directly rather than a calculator. Rules for FY 2026-27 hadn't been finalized at the time this was written, so it's worth checking back before assuming this year's figures still hold.
Before filing your ITR-2:
No, not anymore. ULIPs issued before April 1, 2012 are exempt with no test attached. Ones issued after that stay exempt only if annual premium stays within 10% of the sum assured, and, for policies issued on or after February 1, 2021, also within ₹2.5 lakh. Fail either test, and the proceeds get taxed as capital gains. Death benefits stay exempt regardless.
Only to those issued on or after February 1, 2021. It works alongside the older 10% sum-assured test, not instead of it. Anything issued before April 1, 2012 skips both tests entirely. Check your policy document for the exact issue date if you're not sure.
No. Death benefits are exempt under Section 10(10D) no matter when the policy was issued or how large the premium was. It's one of the clearer advantages of ULIP-based insurance: the payout reaches your family without any tax deduction.
Capital Gain = Maturity Proceeds − Total Premiums Paid. Held more than 12 months, it's LTCG: subtract ₹1.25 lakh exemption, then tax the rest at 12.5% + 4% Cess. Held 12 months or less, it's STCG at 20% + 4% Cess on the full gain, no exemption. The calculator runs all of this automatically.
Yes. The limit is aggregate, across every ULIP you hold that was issued on or after February 1, 2021. Three policies at ₹1 lakh each add up to ₹3 lakh, over the threshold, even though no single policy crosses it alone.
It's counted from issue date to encashment date, checked to the day. More than 12 months puts you in LTCG territory at 12.5% (after the ₹1.25 lakh exemption). Twelve months or under, it's STCG at 20% flat. Crossing the 12-month mark by even a single day changes which rate applies.
Calculations verified by our team including CA Anita Patil. View our full accuracy policy and meet the team →
For informational purposes only. Results are estimates based on the inputs you provide and the rules in effect for the period shown, and are not tax, legal or financial advice. Verify figures against the relevant official source and consult a qualified professional before acting on them. Accuracy & limitations
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