How to report withdrawal of ULIP after the lock-in period in your ITR: Tax rules explained

Budget 2025 clarified that ULIPs with annual premiums over Rs 2.5 lakh are treated as capital assets.

Gains from such ULIPs are taxed at a flat 12.5% under Section 112.

The 12.5% tax applies only to gains exceeding Rs 1.25 lakh in a financial year.

Withdrawals after the lock-in period must be reported in the Income Tax Return (ITR) under capital gains.

The clarification affects ULIPs with premiums above the threshold, distinguishing them from tax-exempt life insurance policies.