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ULIPs - Must you invest in them?

February 14, 2019
In the present day investment market in India there are a lot of options that are readily available with different benefits and linked features that allow a stable fund growth. One of these options that ensure a stable growth of funds is that of investing in ULIPs. ULIPs are Unit Linked Insurance Plans that offer market-linked fund benefits, have a minimum lock in period of five years and serve as a joint platform for insurance coverage and investment benefits. The charges involved in ULIPs are economical and ULIPs generally offer varied and diversified return options. The unique feature of ULIPs is that you can switch between multiple fund options, which means that ULIPs provide significant flexibility to the policy subscriber which allows her/him to choose as per her/his risk appetite. This ensures stable returns over a period of time and makes ULIPs ideal for medium to long term-financial planning.

Tax saving is a very crucial factor for deciding the overall returns from an investment and this is where ULIPs score over various other investment options like Mutual Funds. Section 80C and 10D of the Income Tax Act, 1961, the payable premiums and the incurred benefits from investing in ULIPs are eligible for tax-exemption. 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. ULIPs come with a lock-in period of five years (earlier it as three years). This allows a disciplined approach to financial wellness and also, Section 10D of the Income Tax Act mandates that the amount withdrawn by the policy holder after the lock in period is over is also eligible for tax exemption.

The 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 vehicle 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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