New Delhi, Feb. 5 -- The Union Budget for 2025-26 has proposed a major tax arbitrage for unit-linked insurance policies and endowment plans sold via Gift City. If approved, the maturity proceeds in such dollar-denominated insurance plans will be tax-free if the premium amount is under 10% of the sum assured.

Currently, maturity proceeds in Gift City-linked ULIPs and endowment plans are taxable if the annual premium is above Rs.2.5 lakh and Rs.5 lakh, respectively. That will change once the Budget proposal is cleared in Parliament.

Gift City is a foreign jurisdiction for tax purposes and is regulated by the International Financial Services Centres Authority (IFSCA).

"In order to provide parity to non-residents availing life insurance fr...