How Are Tax Saving ULIPs Useful for Working Professionals?

Getting something more on the income is what all of us expect to get. We all try to grow the hard-earned money that we make by investing either into bank securities or market-linked funds. Traditionally, bank fixed deposits were the safest among all the investments. Though the returns gained are not considerable, the investors get a fixed amount with interest at the end of the term. However, with the changing times, the investment choices have been migrated from the conventional way to the modern way.

Earlier, market-linked investments were considered to be insecure, mainly due to volatility. When the experts started creating awareness, a new perception was created towards investing in the equity market. Stepping forward, the insurance companies also introduced their savings and investment plans that helped people not just availing life coverage but also getting savings and investment benefits. 

When the life insurance investment plans are considered, you majorly have two choices- traditional investment plans such as endowment policies, or the aggressive investment plans like ULIPs. 

Advantages of Unit Linked Insurance Plans

A Unit Linked Insurance Plan, commonly known as ULIP policy, is a blend of three basic things- savings, investment, and life insurance coverage. Bearing in mind these advantages, ULIPs are the best suitable if you are looking for tax saving instruments. A ULIP with tax benefits is the one which suits your needs best and helps you get additional corpus by saving on taxes. Let’s see how a ULIP is a good investment option for tax saving.

Tax Exemption on Premiums

When ULIPs with tax benefits are concerned, the premiums also play an essential role in saving your hard-earned money. The premiums paid towards a ULIP policy are further invested in different types of money market investments, debts, equities. Section 80C of the Income Tax Act of India allows saving taxes on ULIP premiums up to the allowable limit of Rs.1.5 Lakhs. 

Tax Exemption on Death Benefit

ULIP tax benefits apply to the entire amount, which is paid on the demise of the life insured, as the death benefit. The aim behind making the death benefit tax-free is that the beneficiaries/family of the life insured experiences assured financial protection. Death benefits are paid in total, adding the investment returns to the sum assured as decided at the inception of the policy. 

Tax Exemption on Maturity and Partial Withdrawals

Usually, other market-linked instruments such as Mutual Funds not eligible for tax deductions on the investment returns. However, this makes a significant difference with ULIPs, as these life insurance plans allow you to save on taxes even if you withdraw your amount partially or fully. Similarly, the maturity benefits are also exempted from the Income Tax. 

Both death and maturity benefits are eligible for tax deductions under Section 10(10D) of the Income Tax Act. 

Working professionals are more concerned about their income and investing it in the right tool which will give them considerable returns. Today, the cost of living is rising rapidly and one needs to secure his, as well as his family’s financial future wisely. The best ULIP plan in India not only helps you get the suitable life cover but also offers sizeable returns to sustain the future. The only thing you need to understand is your risk appetite. Determine your financial goals, understand the market trends and make your investments wisely.