Rule 49: Specified ULIP capital gains calculation
Rule 49 computes capital gains when an amount, including an allocated bonus, is received under a specified unit-linked insurance policy. It uses separate first-receipt and later-receipt calculations and prevents reuse of premiums already considered in earlier tax years.
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Bare law
Rule 49 - Computation of capital gains for purposes of section 67(5)
(1) If a person receives any amount under a specified unit-linked insurance policy, including any bonus allocated on such policy, then the capital gains arising from receipt of such amount in situations referred in column B of the following Table shall be computed according to column C thereof;
Sl. No. Situations Capital gains 1. Where the amount is received for the first time during the tax year A-B Where, A=the amount received for the first time, including the amount allocated by way of bonus on such policy; and B=the aggregate of the premium paid during the term of the specified unit linked insurance policy till the date of receipt of the amounts referred to as 'A'. 2. Where the amount is received during the tax year, at any time after the receipt of the amount as referred to in Sl.No.1 C-D Where, — C=the amount received during the tax year, at any time after the receipt of the amount as referred to in Sl.No.1, including the amount allocated by way of bonus on such policy excluding the amount that has already been considered for calculation of taxable amount under this sub-rule during the earlier tax year or years; and D =the aggregate of the premium paid during the term of the specified unit linked insurance policy till the date of receipt of the amount referred to as 'C', as reduced by the premium that has already been considered for calculation of taxable amount under this sub-rule during the earlier tax year or years. (2) The capital gains as computed under sub-rule (1) shall be deemed to be the capital gains arising from the transfer of a unit of an equity-oriented fund set up under a scheme of an insurance company that includes unit linked insurance policies.
(3) In this rule, the expression "specified unit linked insurance policy" means any unit linked insurance policy referred to in section 2(22)(c).
Rule breakdown
Confirm that the policy is within the specified category
The rule defines a specified unit-linked insurance policy by reference to section 2(22)(c). Establish that classification before using this computation.
It should not be applied to every life-insurance receipt merely because an insurer issued the policy. Keep the policy terms and the relevant statutory classification with the calculation.
First receipt: amount including bonus minus premiums
For the first receipt during the tax year, the table uses A minus B. A includes the first amount received and the allocated bonus; B is the aggregate premiums paid during the policy term up to that receipt date.
Reconcile the insurer’s receipt and bonus details to the premium ledger. Use premiums actually within the defined period rather than future scheduled premiums.
Later receipt: exclude previously considered amounts
For a later receipt, the table uses C minus D. Its definitions exclude amounts and premiums already considered for calculating the taxable amount in earlier tax years.
Maintain a running record of earlier computations. Without it, the same premium amount could incorrectly be deducted again.
Worked example with separate tax years
Hypothetical: the first receipt including bonus is ₹6 lakh and premiums paid up to that date total ₹4 lakh. Under the stated first-receipt formula the gain is ₹2 lakh.
In a later tax year, suppose the relevant new receipt is ₹3 lakh and aggregate premiums up to that date are ₹5 lakh, of which ₹4 lakh was already considered. The remaining premium component is ₹1 lakh and the later gain is ₹2 lakh, assuming the facts otherwise fit the rule.
Character of the computed gain
Sub-rule (2) deems the computed gain to arise from transfer of a unit of an equity-oriented fund under the described insurance-company scheme.
The rule does not set one universal final tax rate. Apply the relevant Act provisions to the computed gain and taxpayer’s facts, keeping the statutory deeming treatment in view.
Key takeaways
Specified policy first
The policy must fall within section 2(22)(c).
Include the bonus
The receipt variables expressly include allocated bonus.
No repeated premium deduction
Later computations reduce premiums already considered in earlier years.
Practical checklist
- Verify the specified-policy classification.
- Keep a dated premium and receipt ledger.
- Carry forward a record of amounts and premiums already considered.
Avoid
- Do not ignore allocated bonus.
- Do not deduct the same premium again in a later-year calculation.
FAQs
Is an allocated bonus ignored?
No. The table’s receipt variables include the allocated bonus.
Can the full historical premiums be deducted on every receipt?
No. The later-receipt formula reduces the premiums already considered in earlier tax years.
Does the rule apply to all insurance policies?
No. It defines the specified unit-linked insurance policy by reference to section 2(22)(c).
Glossary
- Specified ULIP
- A unit-linked insurance policy referred to in section 2(22)(c).
- A minus B
- The first-receipt computation defined in row 1 of the statutory table.
- C minus D
- The later-receipt computation defined in row 2, with its earlier-year adjustments.