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ULIP Tax Benefits - Tax Saving Investment Option

December 17, 2018
In the present day insurance segment in India, ULIPs have emerged to become one of the most favored ones, because of the numerous benefits that they offer. ULIPs are Unit Linked Insurance Plans that have a minimum lock in period of five years and serve as an ideal investment as well as insurance platform. ULIPs in India come with quite economical charges and offer diversified return options and also multiple switches between available fund options. These features allow the policy subscriber to choose as per her/his risk appetite and help the subscriber in maintaining stable returns over a period of time. One of the best known beneficial features of ULIPs is that they offer tax benefits, much to the advantage of the policy subscriber.

For any successful investment, it is very important that there is considerable saving on applicable taxes.  ULIPs give this benefit extensively and under Section 80C of the Income Tax Act, 1961, the payable premiums are exempt from tax. Furthermore, under Section 80C of the Act, there is a tax deduction of up to an upper capping of Rs. 1.5 Lac on the payable premiums towards a ULIP. As mentioned, there is a lock-in period of minimum five years before the subscriber can make a withdrawal. Under Section 10D of the Income Tax Act, the amount that the subscriber withdraws after the lock in period is over is also eligible for tax exemption.  Therefore, Sections 80C and 10D allow the tax benefits to be operative in a ULIP and the same can be used for saving on taxes.

Any payable premium towards a ULIP is separately channelized towards maintaining the core parts of insurance cover and investment in the available fund options. The lock in period ensures that the corpus is maintained with the available tax benefits on payable premiums. Therefore, ULIPs are ideal as a both short-term as well as long term investment plan with the additional benefits on taxation.

To add to the tax saving benefits of ULIPs, as per the government mandate, the ULIPs have been exempt from LTCG (Long Term Capital Gains) taxation purview. Therefore, any gains made through capital investments in ULIPs are tax free. This feature has further enhanced the scope of tax benefits by investment in a ULIP. When viewed in comparison to the mutual funds (MFs), ULIPs score higher on the tax saving front as the capital gains made on equity related mutual funds are taxable by 10% (gains above Rs 1 Lac in a fiscal). This has made potential investors welcome the beneficial opportunity of investing in ULIPs and has made ULIPs ideal instruments for investment and building up the financial corpus over a period of years with the extra benefits of saving on applicable taxes.

HDFC Life offers HDFC Life Click 2 Invest ULIP an online unit linked comprehensively beneficial plan that gives tax benefits and at the same time provides market-linked returns on your investment in the various available fund options. For details, click on the mentioned link: https://www.hdfclife.com/savings-plans/sanchay-plus .

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ULIPs: A viable Tax Saving Investment Option

HDFC Life Insurance Company Limited. CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101.

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