Provided that the premium amount should be less than 10% of the sum assured under the ULIP, the premium paid towards this policy is allowed as a deduction under Section 80C of the Income Tax Act.
ULIPs allow tax-free withdrawals in the event of the death of the policy holder, maturity of the policy or partial withdrawals. This tax exemption under Section 10(10D) of the Income Tax Act gives ULIPs an edge over mutual funds as the income earned from the latter is fully taxable.
Tax Deduction on Top-Up Premium
Top-up premiums are the extra amount you invest in a policy over and above the existing periodic premiums. ULIPs allow investors to invest excess cash through top-ups, all of which are eligible for tax deduction or exemption. However, this premium should not exceed 10% of the sum assured under Section 10(10D).
So now you know, how availing ULIP tax benefits is a smart way of saving more money. If you’d like to know more about how a ULIP plan can help you grow your wealth and achieve your financial goals, check out the ULIP plans available on Finserv MARKETS.