Unit Linked Insurance Plans offer three-fold advantages to an investors. The benefits of ULIPs include tax savings, insurance, and capital growth. Here’s a detailed look at how this tax-saving investment can offer you all these three advantages.
Tax saving benefits of ULIPs
The provisions of the Income Tax Act recognize ULIPs as tax-saving investment options. Essentially, this is how ULIPs from Future Generali India Life Insurance can help you save tax.
- When you invest in ULIPs, you’re required to pay a premium to the insurance company in exchange of benefits like capital growth and a protective life cover.
- This premium can be paid either as a lump sum amount or as periodic payments, due at monthly, quarterly, semi-annual, or annual intervals.
- The premium you pay in each financial year can be deducted from your total taxable income, as per the provisions of section 80C but there is a cap of ₹1,50,000 if premium paid in a financial year is 10% of the sum assured.
- Furthermore, at the end of the plan term, you receive maturity benefits. Alternatively, in case the insured passes away, the nominee receives death benefits. These inflows are also exempted from tax, as per section 10(10D), the only condition is that the premium amount should be less than or equal to 10% of the sum assured.
- The long-term capital gains obtained from the investment is also tax-free. It is important to note that ULIP is amongst the only market-linked instruments to remain outside the range of Long Term Capital Gains tax, giving them a unique advantage over other instruments in terms of post-tax returns.
Insurance benefits of ULIPs
A portion of the premium you pay for purchasing and renewing this tax-saving investment goes towards providing you with a protective life cover. This is essentially the same as life insurance. With ULIPs, you receive the following insurance benefits.
- In case the life assured passes away before the end of the policy term, death benefits are paid out to the beneficiary of the life assured. This lump sum payout can help the surviving members of the family cope with any urgent financial requirements.
- Alternatively, if the life assured survives the plan term, maturity benefits are paid out to the investor.
Capital growth with ULIPs
Capital growth is also among the many benefits of ULIPs offered by Future Generali India Life Insurance. As mentioned above, one portion of the premium goes towards providing a protective life cover. The rest of it (after deduction of allocation charges if any) is invested in different funds, depending on the investor’s choice.
- Risk-aggressive investors can choose to have their premiums invested in equity funds.
- For risk-averse investors, debt funds make a better choice.
- If your risk profile is balanced, you can opt for a mix of both these funds.
Over the course of the investment tenure, as the fund value increases, the money invested in this tax-saving investment also accumulates, thus leading to capital growth.