Why your tax planning should include investment in ULIP Insurance?

Investment tools like ULIPs can save investors money on taxes. This product offers the dual benefits of building equity as well as life insurance protection. The benefits of a ULIP insurance plan are hard to match in any other investment product. With the same 5-year lock-in period, these investments offer better returns than tax-saving fixed deposits, National Savings Certificates, and post office deposits. Plus, ULIP premiums can be deducted from your taxable income, and the maturity benefit is completely tax-free.

Some Tax benefits on investment in ULIP insurance discuss below: 

Tax-free on death case 

A ULIP insurance plan provides the family with a death benefit and returns generated by the plan in the event of the policyholder’s death. These returns are tax-exempt. Tax-free partial withdrawals: Income from unit-linked insurance plans can be withdrawn even partially tax-free. As long as you don’t withdraw more than 20% of the fund’s value from a ULIP plan after the lock-in period, you’ll not have to pay any taxes. 

Benefits on premium 

Up to Rs.1.5 lakh in premiums you pay for ULIP plans can be deducted from your taxable income under Sections 80C and 10D of the Income Tax Act. To enjoy the tax exemptions and benefits of a ULIP insurance plan, you must continue the policy for at least five years. ULIPs are the only market-linked investment instruments that are tax-free even after maturity, according to the ULIP tax benefits on maturity section. By paying the premiums and receiving the maturity interest, you save tax both ways. In order to qualify for tax exemption upon maturity, premiums must be lower than 10% of the sum assured. 

Deductions on top-ups 

With ULIPs, investors have the option of buying periodic top-ups, which allows them to increase their investment. Sections 80C and 10D of the Internal Revenue Code allow for the deduction of these top-ups. Profits earned from shares, equity mutual funds, and ELSS over Rs.1 lakh are subject to long-term capital gains tax. ULIPs, however, are not subject to such a tax. 

Benefits of long term 

ULIP insurance is locked in for a minimum of five years, so you will be able to take advantage of the tax benefits. The tax savings accrue with increasing investment horizons. 

PPFs, mutual funds, and traditional insurance plans do not stand up to unit-linked insurance plans. Despite the fact that life insurance provides death benefits, it does not assist in increasing your wealth. A mutual fund, on the other hand, allows you to grow your wealth while getting good returns, but it doesn’t provide insurance coverage. This gap can be bridged by a ULIP insurance plan, which also has the advantage of providing higher tax savings. 

Tax benefits on maturity 

The unique aspect of this type of investment is the lack of taxation, even at maturity. The tax benefits of ULIP insurance plans also range from the time of premium payment to the time of maturity, so that you can save both now and in the future.