Things You Must Know About Tax Benefits Of ULIPs

A ULIP is a perfect instrument if you are looking for an  investment cum insurance plan. The primary benefits of ULIP is the versatility and economic security that comes with it. Moreover, ULIP investments can provide high returns to help policyholders achieve their financial goals. A portion of the payment is utilised to provide health insurance to the insured's family, while the other half is deposited in market-linked assets selected by the insured, such as stock, debt, etc.

ULIPs have become a popular investment option in India, allowing customers to avoid tax on premium payments. They are also useful in financial planning. ULIPs not only give coverage but also assist you in managing your money to achieve your wealth building objectives. You may invest in a blend of both debt and equity funds with the aid of these schemes, which delivers high returns. To know more about tax benefits of ULIPs, read on.

What Does ULIP Mean?

The Unit Linked Insurance Strategy (ULIP) is one of the distinctive benefits of ULIP is the tax savings benefit, which may be selected during the policy term and at maturity.
Customers favour ULIP plans above other accessible investing choices due to its flexibility. It is regarded as a reliable long-term solution for achieving wealth growth objectives. This is due to the fact that it combines returns, tax savings, and insurance.

What Are The Tax Benefits Under ULIPs?

Following are some of the tax benefits under ULIPs -

Savings Under Premiums

Under sections 10D and 80C of the Income Tax Act of 1961, a policyholder can claim tax deductions up to Rs.1,50,000 on policy premium amounts paid towards ULIPs. If one continues ULIP coverage for 5 years and you will be tax-free.

Maturity Benefits

ULIP is a market-linked investment plan that delivers tax-free maturity amounts under current legislation. If the policies are purchased after April 1, 2012, the premium must be less than 10% of the total insured in order to qualify for tax advantages at maturity. If the yearly premium is less than 20% of the sum insured, the maturity amount will be tax-free for customers who acquired policies after April 1, 2012. In the event of the death of the life guaranteed, the death benefit is also tax-free.

Free Withdrawals

In the event of the policyholder's untimely death, the family is entitled to a sum insured amount in addition to the profits provided by the ULIP plans. The payment is tax-free under Income Tax laws.

Partial Withdrawals

Throughout the context of ULIPs, partial withdrawals remain tax-free. If you remove the money out of a ULIP plan just after the 5-year lock-in term, you do not have to pay taxes on such withdrawals. The restriction is that the withdrawal sum does not surpass 20% of the fund's quantity or valuation.

Long Term Benefits

For a long-term investment, one may take advantage of ULIP tax savings. The lock-in period is now around 5 years, and therefore individuals can earn for at least five years in a row by saving tax on the premiums. If people keep their policy, individuals can get extra tax breaks for ULIPs.

Rerouting Premiums

When you invest in ULIPs, you can reroute your future premiums at any moment between the different fund alternatives. You must enter the insurance number and specify which fund you are diverting your premiums to. You may also choose how much of the premium goes to every kind of fund.

Endnotes

ULIPs grant you the ability to create wealth building objectives and to secure your family's future and ambitions. The plans are flexible in that you can swap funds based on your investing objectives or market activity. Enjoy tax benefits and tax-free withdrawals at maturity or partial withdrawals.

Also read: New Age ULIPs: How Have ULIPs Evolved In India?

Learn How To Use A ULIP Calculator And What It Can Do For You