What are the changes made by IRDA in ULIP products and what are its implications for investment u/s80C of IT?

Answer 1

The IRDA's guidelines will increase transparency and tighten marketing norms for ULIP.. They give a somewhat level playing field.to the mutual funds, which felt threatened by the tax-free income of ULIP and big-budget marketing by insurers.. Since the risk of investments in ULIP was borne by the unit-holder there was no underlying risk to institutions.The mutual fund industry had complained to SEBI, which in turn, had apprised IRDA of the industry's fear that ULIP was competing unfairly with mutual fund products because they were "less regulated" and followed easier norms.The insurance companies' disclosures such as risk factors and expense accounting in net asset values are far less than than those of the mutual fund.

Mutual fund investors who buy products such as equity-linked saving schemes get very little benefit under Section 88 of the Income Tax Act, while ULIP income is fully tax-free. Also, SEBI norms allow mutual funds to incur only limited marketing expenses while insurers are free to spend any amount to market their products. ULIP, which constitute nearly 90 per cent of new life insurance policies sold by private insurers, are by nature investment vehicles that come with a small insurance cover. A large part of a ULIP `premium' is divided into units and invested in equities and debt instruments, the mix varying according to each policy-holders' risk appetite. The units are akin to mutual fund units and the investor can redeem them at maturity at net asset value. However, since the maturity date is predetermined, ULIP act more like a closed-ended fund. Since most of the premium is channelled to investments, the risk to the insurer is substantially low compared to pure term assurance. Their capital requirement also comes down because they need not put up large solvency reserves.

The tax holiday enjoyed by ULIP will go under the new dispsnsion
They will be on a part with the Mutual Funds in this respect.

Answer 2

SORRY I DO NOT DO SOME ONES HOMEWORK FOR THEM UNLESS THEY ARE PAYING OR FEMALE AND SEXY .