United Linked Insurance Plans (ULIPs) are one of the best tax-saving investment tools available to investors today. It offers dual benefits of wealth creation and life insurance protection. You seldom find an investment product that can provide all the benefits of ULIP plan. It gives you better returns than tax-saving fixed deposits, NSC and post office deposits with the same lock in period of 5 years. The best part is that not only are your ULIP premium payments eligible for tax deductions, your maturity benefit is tax-free as well.
Take a look at the average returns that you can expect from ULIPs with the same lock-in period of 5 years. The returns are at par with National Pension Scheme and Equity-Linked Saving Schemes (ELSS).
Average returns from various debt and equity instruments
|Investment Instrument||Type||Rate of Return (annual)||Guaranteed Returns||Lock-in period (min.)|
|Post Office Deposits||Debt||7.6%||Yes||5 years|
|Tax-saving Fixed Deposits||Debt||6.25-6.75%||Yes||5 years|
|Sukanya Samridhi||Debt||8.3%||Yes||21 years|
|Senior Citizen Savings Scheme||Debt||8.4%||Yes||5 years|
|NPS||Equity, Debt||12%||No||Till retirement|
Source: Economic Times 
Apart from a small lock-in period and good returns, ULIPs are certainly an amazing tax saving tool in your hand. Now, let’s explore the 7 things you should know about the tax benefits of ULIPs.
ULIP tax benefits on premiums:
Firstly, the policy premiums that you pay for your ULIP plans allows you to avail tax deductions up to Rs.1.5 lakh under section 80C and 10D of the Income Tax Act. Make sure that you continue the ULIP policy for at least 5 years to enjoy tax exemption and derive benefits of ULIP plan.  ULIP tax benefits on maturity: A unit linked insurance plan is the only market-linked investment instrument that is not liable for tax even after maturity. Therefore, you save tax both ways – while paying premium and while receiving the maturity amount. However, the premium amount must be less than 10% of the sum assured to avail tax exemption on maturity. 
Tax-free withdrawals on death:
In case of the death of the policy holder, the family receives a sum assured amount plus returns generated by the ULIP plan. This payout is exempt under income tax rules.  Tax-free partial withdrawals: In a unit linked insurance plan even partial withdrawals are tax-free. When you withdraw money from a ULIP plan after the five-year lock-in period, you don’t have to pay any taxes on those withdrawals, provided the withdrawal amount does not exceed 20% of the fund value. 
Deductions on top ups:
ULIPs give investors the flexibility to increase their investment by buying periodic top-ups. These top-ups are also eligible for income tax deductions under sections 80C and 10D. Protection from long-term capital gains tax: While profits earned from shares, equity mutual funds and ELSS above Rs.1 lakh are subject to LTCG tax, there is no such tax liability on ULIPs.
Long-term tax benefits:
You can derive tax benefits of ULIPs with a long-term investment horizon. Since the lock-in period for ULIP is 5 years, you gain by saving tax consecutively for at least 5 years on your insurance premiums. If you continue with your policy, you stand to gain more ULIP tax benefits over the years.
Unit linked insurance plans score over traditional insurance, mutual funds and PPFs. While life insurance may provide life coverage, it doesn't help you grow your wealth. Mutual funds on the other hand allow you to get good returns and grow your wealth, but with no insurance coverage. The benefits of ULIP plan is that it bridges this gap and gives you an added advantage of higher tax savings.
Future Generali Easy Invest Online Plan gives you an opportunity to grow wealth and insure your family’s future with as low as Rs.4,000 per month. It allows you the option to invest in 6 different types of funds and the flexibility to switch funds according to your investment goals or market movements. You can enjoy tax exemptions and tax free withdrawals on maturity or partial withdrawals.