Rule 49 — Computation of capital gains for purposes of section 67(5). Made under s.67 of the Income-tax Act, 2025.
Rule 49 gives effect to Section 67 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) applies where a person receives any amount under a specified unit-linked insurance policy, including any bonus allocated on such policy. The capital gains are then computed by the Table, which has two entries.
Entry 1 covers the amount received for the first time during the tax year. The gain is A minus B, where A is the amount received for the first time including the amount allocated by way of bonus on the policy, and B is the aggregate of the premium paid during the term of the policy till the date of receipt of A.
Entry 2 covers an amount received during the tax year at any time after the receipt referred to in entry 1. The gain is C minus D. C is the amount so received, including bonus allocated on the policy, but excluding the amount that has already been considered for calculation of the taxable amount under this sub-rule during an earlier tax year or years. D is the aggregate of the premium paid during the term of the policy till the date of receipt of C, as reduced by the premium that has already been considered for calculation of the taxable amount under this sub-rule during an earlier tax year or years.
Sub-rule (2) fixes the character of the result: the capital gains computed under sub-rule (1) are deemed to be 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.
Sub-rule (3) defines "specified unit linked insurance policy" as any unit linked insurance policy referred to in section 2(22)(c).
Section 67(5) treats a receipt under a specified unit-linked policy as giving rise to capital gains but does not say how to strip out the cost. A policy pays out over years, premiums are paid over years, and without a running rule the same premium could be set off twice or a later receipt taxed on its gross amount. The rule supplies a cumulative method that tracks what has already been taxed and what premium has already been used, and then fixes the character of the gain so the rate provisions have something to attach to.
The two entries are not alternatives — entry 1 is used once, for the first receipt, and every later receipt runs through entry 2 with both sides netted against what has gone before. That is the trap in D: premium already used in an earlier year's computation is removed from the aggregate, so a policyholder cannot claim the full premium history again on a second payout. The same is true on the receipt side, where C excludes amounts already brought to tax under the sub-rule. Sub-rule (2) matters as much as the arithmetic: the gain is deemed to arise from transfer of a unit of an equity-oriented fund, so the treatment that follows an equity-oriented fund unit applies to the computed figure even though no unit of a fund was in fact sold. And the rule reaches only a policy within section 2(22)(c) — sub-rule (3) is the boundary.
A person holds a specified unit linked insurance policy and has paid premiums aggregating Rs 12,00,000 by the date of the first payout. In the first tax year he receives Rs 15,00,000 including allocated bonus. Under entry 1 the gain is Rs 15,00,000 minus Rs 12,00,000, that is Rs 3,00,000. Two years later he receives a further Rs 6,00,000, having paid Rs 2,00,000 more in premium in the meantime. Under entry 2, C is Rs 6,00,000 and D is the aggregate premium till that date reduced by the Rs 12,00,000 already used, leaving Rs 2,00,000, so the gain is Rs 4,00,000 — not Rs 6,00,000 less the whole Rs 14,00,000 of premium.
A policyholder meets it when a unit-linked policy pays out and the capital gains schedule of the return has to be filled, and again on any later receipt under the same policy, where the earlier year's figures must be carried forward.
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
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.