MAM
Tax Benefits of ULIP Plans vs. Term Life Insurance: 2025 Update
In India, the world of finance is always changing, especially when you look at life insurance and ways to save on taxes. ULIP plans and term life insurance are popular for those wanting to protect their family and get the most out of tax breaks. If you’re planning to in invest in 2025, it’s good to know the tax differences between these options.
What are ULIP plans
ULIP stands for Unit Linked Insurance Plan. These plans mix investment and insurance together. A portion of what you pay goes to life insurance, and what’s left is invested in stocks, bonds, or a mix of both. How well those investments do decides how much your ULIP is worth later on. That’s why ULIPs can be a good pick if you want both insurance and a chance to earn some money from the market.
What is term life insurance
Term life insurance is a simple kind of insurance. It gives you risk protection for a set time. If you pass away during this time, your beneficiary gets a payment. It doesn’t have any investment or maturity payouts. People like it because it gives you a lot of coverage for a low price.
Key tax benefits of ULIP plans and term life insurance
Tax deductions under Section 80C
Both ULIP plans and term life insurance premiums qualify for deductions under Section 80C of the Income Tax Act, 1961. You can claim a maximum deduction of up to Rs. 1.5 lakh per financial year.
ULIP plans: Premiums paid for self, spouse, or children are eligible.
Term life insurance: Premiums paid for self, spouse, or children also qualify.
The premium should not exceed 10% of the sum assured, else the deduction will be restricted. This rule is applicable for policies purchased after 1 April 2012.
Maturity and death benefits under Section 10(10D)
Section 10(10D) of the Income Tax Act offers exemptions on maturity proceeds for both ULIP plans and term life insurance, under specific conditions.
For ULIPs: The maturity benefit, including bonus and top-up premiums, is exempt from tax if the premium amount does not exceed 10% of the actual sum assured. For policies issued after 1 February 2021, if the aggregate premium paid in any year for ULIP policies exceeds Rs. 2.5 lakh, the maturity proceeds will be taxable as capital gains.
For term life insurance: Since these policies do not have any maturity benefit, the provision is relevant for the death benefit, which is always tax-free for the nominee.
Death benefit exemptions
In both products, the death benefit paid to the nominee is fully exempt from tax in the hands of the recipient, regardless of the premium amount paid.
Taxation of surrender value
ULIPs: If surrendered before completing five years, the surrender value is taxable as per your income tax slab. After five years, surrender value and gains are tax-free unless the annual premium exceeds Rs. 2.5 lakh for policies issued after 1 February 2021.
Term life insurance: As there is no surrender or maturity value, this aspect is not applicable.
Recent changes and 2025 updates
High value ULIPs and taxability
The Union Budget, 2021 introduced a rule that greatly impacts ULIP plans. If the annual premium paid on ULIP policies issued on or after 1 February 2021 exceeds Rs. 2.5 lakh, the maturity amount will no longer remain entirely tax-free. Gains above this limit are taxed as capital gains under Section 112A, which currently stands at 10% without indexation benefits for amounts over Rs. 1 lakh. In 2025, this rule remains unchanged. It is crucial for high net-worth individuals to evaluate the implications before purchasing multiple ULIP policies to maximise tax-free returns.
2025 updates for Section 80C
Section 80C is still the main way to get tax deductions on premiums you pay for ULIP plans and term life insurance. But, the total limit for each person is still Rs. 1.5 lakh. This includes all the investments that qualify, not just insurance premiums. New options like the National Pension System give you extra chances to save on taxes under Section 80CCD(1B).
Comparing tax benefits of ULIP plans and term life insurance
ULIP plans and term life insurance both provide tax benefits, but the nature and scope of these benefits vary. While both allow deductions under Section 80C, ULIPs offer additional advantages like tax-free maturity under certain conditions. However, ULIPs also involve complexities such as potential capital gains tax and taxable surrender value if exited early. The table below summarises the key differences:
Practical examples for Indian policyholders
Let us consider two investors, Rahul and Priya.
Rahul buys a term life insurance policy with a sum assured of Rs. 1 crore and pays a premium of Rs. 12,000 per year. He claims this amount under Section 80C, and his nominee will receive a Rs. 1 crore death benefit, completely tax-free under Section 10(10D).
Priya invests Rs. 2 lakh annually in a ULIP plan. She claims the premium under Section 80C. Upon maturity, since the aggregate annual premium does not exceed Rs. 2.5 lakh, her maturity proceeds will be tax-exempt under Section 10(10D).
If Priya’s annual premium was Rs. 3 lakh, only the death benefit component would be tax-free. The maturity proceeds would be taxable as capital gains.
Important considerations for choosing between ULIP plans and term life insurance
Assess your financial goals
ULIP plans suit those seeking long-term wealth creation with life cover. The market-linked nature presents both opportunity for growth and exposure to risk. Term life insurance remains best for those wanting to protect their family with a large sum assured and low cost.
Evaluate premium limits
To maintain tax exemption on maturity, ULIP investors should restrict annual premiums to Rs. 2.5 lakh across all policies purchased post-February 2021. Term life insurance premiums tend to be much lower for high coverage.
Investment flexibility
ULIP plans offer switching benefits between funds, catering to investors with changing risk profiles. This flexibility is not available with term life insurance.
Conclusion
For Indian investors in 2025, both ULIP plans and term life insurance are still key parts of a tax-smart financial plan. Term life insurance is simple, cheap, and covers a lot of risk, so it’s great if you just want protection. ULIP plans give you both life cover and a chance to grow your money with the market, plus good tax breaks if you follow the premium rules. Recent tax changes mean it’s really important to pick the right kind of policy and premium amounts.
If you understand the tax perks, rules around Sections 80C and 10(10D), and how high-value ULIPs are taxed now, you can invest wisely. Always think about what insurance you need and how much you can save on taxes, and make sure your family’s financial safety comes first, not just quick gains. If you’re not sure what works best for you, talk to a financial advisor.
Brands
Lovetc appoints Tamannaah Bhatia as brand face
Ananya Birla’s premium colour cosmetics line gears up for strong second year with 30 per cent monthly growth and fresh face category launch.
MUMBAI: Lovetc is tinting its success story with a starry new shade Tamannaah Bhatia has just been named the face of Ananya Birla’s premium beauty brand. As the colour cosmetics label under Birla Cosmetics completes a vibrant first year in April 2026, it is entering its second chapter with impressive momentum. The brand has delivered 30 per cent month-on-month growth, expanded thoughtfully into offline and quick-commerce channels, and built a loyal following through a digital-first approach mixed with genuine consumer connections.
Priced between Rs 650 and Rs 1,850, Lovetc focused its debut portfolio on lips and eyes categories. Hero products such as Tint, Talk, Etc Radiant Glow Hydrating Tint (SPF 30 PA++), Pout, Perfect, Etc Matte Bullet Lipstick, and Melt, Miracle, Etc Treatment Oil-Infused Lip Balm quickly won hearts. Early shoppers showed strong purchase intent, with average order values ranging from Rs 1,200 to Rs 2,800 and an average of two items per transaction, signalling healthy basket-building and repeat purchases.
The brand made its mark in key metros including Mumbai, NCR, Chennai, Bengaluru, Chandigarh, Patiala, Ludhiana, and Cochin, while Tier-2 cities surprised with robust demand and loyalty. On the distribution side, Lovetc entered 90 offline retail doors in year one and is on track to cross 150 doors by Q2 2026, choosing each outlet carefully to match its premium positioning.
To mark the milestone, Lovetc is stepping into the face category with the launch of Ace, Face, Etc 4K Blur Matte Foundation in eight shades tailored for diverse Indian skin tones. Additional innovations like the multi-purpose The Etc stick and longwear lip tint Love Bites are also in the pipeline.
Tamannaah Bhatia, known for her pan-India appeal across films and her authentic love for beauty, brings cultural relevance and credibility to the brand. Ananya Birla, founder of Birla Cosmetics, said, “Year Two is going to be big. The brief for every new launch remains the same: Does it perform? Is it playful? Is it kind to the person wearing it? Performance, playfulness, and kindness that is the promise we intend to keep. Bringing Tamannaah on board feels especially pertinent because she brings together an authentic love for beauty with a connection that cuts across audiences and geographies.”
Tamannaah Bhatia added, “I have always loved beauty as a form of self-expression, and what drew me to Lovetc is that it feels playful, thoughtful, and modern at the same time. I am excited to be the face of a brand that is creating products with both performance and personality.”
With deliberate growth, quality-focused retail expansion, and a celebrity partner who genuinely connects with beauty lovers nationwide, Lovetc is blending performance with personality in a market hungry for thoughtful premium options. As it steps into year two, the brand is proving that in beauty, the right tint can make everything glow a little brighter. Delhi, Mumbai, or a Tier-2 favourite Lovetc is colouring India’s beauty shelves with confidence and charm.
