Investing in the equity market attracts the direct tax of 10% which is a burden to any investor. However, 4G ULIPs enjoy the exemption from the Long Term Capital Gains, so costumers don’t have to pay tax on their long term investment. In addition, online ULIPs offer free switches between different funds which were initially taxable making them one of the most competitive product in the market to invest.
Here is a transcription of the video in which, Anuj Mathur, MD and CEO, Canara HSBC Oriental Bank of Commerce Life Insurance, is talking about the tax benefits associated with online ULIPs.
Vivek Law – In this budget, ULIPs were excluded from Long Term Capital Gains tax. Has that been a game changer? Because we as Indians look at tax as one of the reasons for which we invest.
While in the return piece it’s a 1% cut when you pay 10% but do you still feel that that has helped in bringing noticeability to the product because as you rightly said for the longest time it was a product that was shunned and people said that this is not good for us but now it’s come out back in its new avatar with all the reforms that have happened. Has LTCG helped in pushing the product?
Anuj Mathur – When we actually sell a product LTCG is only one of the benefits which are available, so we don’t sell insurance on the basis of only tax advantage. However, you are right actually, this LTCG thing now is differentiation and there is a reason for the differentiation that you are buying a life insurance cover protection. So, yes that is going to help the customer because even if you are investing directly into the equity market there is a tax rate of 10% which is payable. Here the beauty is that if you’re investing for the long term then there is no Long Term Capital Gain. The other advantage which many of our customers are not aware of is that even if you are switching, so let’s say initially you opted for balance and then you go for growth when you switch, it is not a transfer so you don’t have to pay tax on that. It’s a policy which you have bought so it’s in the same scheme, say even if you are kind of switching you don’t end up paying taxes and finally it is the maturity proceeds which are taxed. So I think it’s a benefit which is available to the customer and people should seriously think about it.
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