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A Unit Linked Insurance Plan is the most preferred investment option of a majority of investors. ULIPs are a combination of investment and insurance in a single integrated plan. They offer a plethora of benefits like switching options, high returns, and so forth. However, one of the significant benefits is its tax benefits. The tax exemptions allowed on ULIP investments helps an individual to save money for a better future.
Before investing, one must understand the essential ULIP tax benefits allotted to the investors. Here’s a closer look at the tax deductions:
ULIP Tax Benefits:
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Premiums
Under Section 80C of the Income Tax Act, 1961, the premiums are deducted up to Rs. 1,50,000 on taxable income.
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Maturity Benefits
Under Section 10(10D) of the Income Tax Act, 1961, the amount received on the maturity date is tax-free.
| ULIPs purchased before April 1, 2012 | ULIPs purchased after April 1, 2012 |
| An investor can avail deduction if the premiums are less than 10% of the sum assured | An investor can avail deduction if the premiums are equal to 10% of the sum assured |
| If the premium is more than 10% of the sum assured, a deduction is availed on the amount, which equals to the 10% of the sum assured | If the premium is more than 20% of the sum assured, a deduction is availed on the amount, which equals to the 20% of the sum assured |
Tax Implications on the Maturity Benefits:
The following conditions must be fulfilled in order to obtain tax benefits on the maturity of a ULIP Plan:
- ULIP Plans need to be continued until the lock-in period of 5 years.
- The premiums must be paid on a timely basis.
- If a policyholder surrenders the ULIP policy before the lock-in period, he will not be eligible to receive the tax benefits. In case any deductions have been availed in the previous years, it will be added to the policyholder’s income.
- When the policyholder pays the premium, which is less than 10% of the sum assured, the maturity amount is tax-free.
- If the premium amount is more than the percentage offered by the insurance company, the money received on the maturity date is added under the income.
To sum up, not just tax benefits, high ULIP returns is another reason why you should consider investing in such a plan. However, the returns depend on the funds option of the policy. Every policyholder must select the funds based on his needs and risk appetite. Bajaj Allianz ULIP from Bajaj Finserv MARKETS allows the growth of your corpus over the due course of your investment plan. Moreover, the unit linked insurance plans available on Bajaj Finserv MARKETS are comprehensive investment products for a brighter future in the long run.
To know more on ULIP investments in depth, you can check out these blogs:
Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and exclusive EMI store, all under one roof- anytime, anywhere!
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