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ULIP as a Tax Saving Investment

By Finserv MARKETS - Dec 24,2019
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ULIP as a Tax Saving Investment

The Income Tax Act, 1961 offers various investment avenues for investors to reduce their tax liability. If you wait until the last moment to make your tax-saving investments, you might not be able to make the right decision. You need to invest carefully in an option that is ideal for your goals and helps to save tax. You need to consider several factors when choosing an investment product.

Investors are now shifting from fixed deposit investment options to mutual funds as well as insurance plans. If you are looking at an investment instrument that offers a mix of insurance and returns on investment, you can certainly opt for a Unit-Linked Insurance Plan. ULIPs are market-linked investment products that provide you with the dual benefits of insurance and investment.

Benefits of ULIPs

Discussed below are a few important advantages of investing in a ULIP.

  • Tenure

ULIP investment come with a minimum tenure of five years. Keeping your investments locked for such a period makes you a disciplined investor. The tenure is calculated from the date on which the policy came into force.

  • Returns

ULIP plans invest across different types of assets through various funds and the renewals help in tax savings. Moreover, the value that you receive on maturity is exempted from tax.

  • Tax benefit

According to Section 80C of the Income Tax Act, 1961, you can claim ULIP tax benefits up to INR 1.5 lakh on an annual basis. This means that you can invest in a product that offers an insurance cover and get the benefit of growing your wealth while enjoying a tax advantage.

  • Flexibility

In a ULIP investment, you get the option of transferring funds as many times as you want, without any cost. You can select between income, balanced, growth funds or equity, according to your investment goals, risk-taking capacity and financial requirement.

  • Top-up investment

You can invest any additional cash through top-ups for your ULIP investment. This top-up can be deducted as per Section 80C and Section 10(10D). However, the premium paid should not be more than 10% of the total amount assured.

  • Dual advantages

With a ULIP investment, you can simultaneously be insured for your life and earn a large corpus at the end of your investment tenure to help you achieve your long-term financial goals.

The pros of a ULIP investment will help you make a wise decision. Such an investment vehicle provides a complete package of life insurance, financial security and ULIP tax benefits. In addition, the charges associated with ULIPs such as fund management cost, administration charge, premium allocation charge and surrender charge have declined over time, making it an ideal investment option during this tax season.

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522