outin the case of ulip any sum received after january 31 2021 which entails premium payments exceeding rs 25 lakh in any financial year during the policy term would be taxable in the year of receipt as capital gains said mehta such sums taxability would be on a par with those received on the transfer of equityoriented mutual fundsthe limit of rs 25 lakh would be applied across ulips held by the same policyholder however sums received upon death will continue to be exemptto enjoy the taxfree benefits of ulip investors have to buy a policy where the annual premium is not more than 10 of the sumassured though the term of ulip is 10 years one can get the prematurity taxfree amount after five years of the policy being enforcedthe new provisions in both schemes apply from february 1 2021 ulips issued up to january 31 2021 would remain unaffected mehta saidulips were on a par with mutual funds before longterm capital gains were introduced in 2018 returns on ulips were superior to mutual funds after the seventh year because of the nature of charges in insurance after the tax was reintroduced insurance schemes generated better returns after six years now it is back to seven years said an insurance industry officialthe amendment seeks to close the loophole used by insurance companies to structure schemes for high networth individuals to avoid tax by reporting investment gains as proceeds from a maturing insurance policy industry sources said this tends to reduce the competitive advantage that ulips enjoyed as compared to other shortterm investment vehicles said tarun chugh md ceo of bajaj allianz lifewatch budget 2021 watch out for the devil in the fine print