What You Should Know About ULIP Tax Benefits

An insurance programme that combines a life insurance policy with an investment is known as a unit-linked insurance plan, or ULIP. As a ULIP investor, you are required to pay regular premiums. One portion of your premium is used to pay for life insurance, while the other portion is used to aggregate assets from the wider portion (are invested in equity and debt financial instruments). By enabling you to build your savings and provide for you in times of need, this type of investment guarantees your future.

Unit Linked Insurance Plans, or ULIPs, are now a well-liked financial tool in India that provide tax savings on premium payments. They are crucial in financial planning as well. ULIPs allow you to invest your money to achieve your financial objectives for wealth growth in addition to offering insurance. These plans enable you to participate in a mix of debt and equity funds, producing profitable results. To know more about ULIP Tax Benefits, read on.

What Is The Meaning Of ULIP?

One of the unique features of ULIPs is that it is available both during the policy term and at maturity, is the tax savings advantage. Due to their flexibility, customers prefer ULIP plans over other easily available investing options. It is recognised as a trustworthy long-term approach for reaching goals related to wealth creation. This is because it combines earnings, tax benefits, and insurance.

Tax Benefits Under ULIPs

Following are the listed benefits under ULIPs -

• Tax Savings on Premiums - Sections 10D and 80C of the Income Tax Act, 1961 allow policyholders to deduct up to Rs. 1,50,000 in taxes from the insurance premiums they pay for ULIPs. Keep your ULIP policy active for another five years to benefit from the tax break.
• Tax Savings On Maturity - According to current rules, such as section 10 (10D) of the Income Tax Act of 1961, ULIPs provide maturities with tax-free sums. If the yearly premium is less than 20 percent of the sum insured for persons who bought policies after April 1, 2012, the estimation technique will be tax-free. The death benefit is likewise tax-free in the event of the life assured's passing.
• Tax-Free Withdrawals - In contrast to the returns generated by ULIP plans in the case of the policyholder's departure, the policyholder's family is eligible to a substantial insured amount. The pay-out is exempt from taxation under income tax regulations.

Other Benefits Available With ULIPs

Following are some of the other benefits provided by Unit-Linked Insurance Plans - 

• Partial Withdrawals - ULIPs provide for tax-free partial withdrawals. If you take money out of a ULIP plan just after the lock-in period of five years, you are exempt from paying taxes on such withdrawals. The limitation is that the withdrawal amount won't be greater than 20% of the fund's worth or amount.
• Long Term Tax Benefits - For a long-term investment, customers can profit from ULIP tax advantages. You benefit from the tax savings on your premiums for at least five straight years during the lock-in period, which is around five years. If you keep your policy, you will be able to get additional tax benefits for ULIPs.
• Everything Under A Single Plan - Compared to mutual funds, PPFs, and other standard insurance plans, unit-linked insurance plans provide a number of advantages. Although it offers life insurance, it does not assist in wealth growth. On the other hand, mutual funds offer you fantastic returns but no insurance coverage. ULIP plans, however, provide a bridge and an extra advantage of tax savings.

Endnotes

ULIPs afford you the opportunity to set savings goals for your family and guarantee their income stream. The plans are flexible, enabling you to pick from a range of fund options and switch funds based on your investment objectives or the state of the market. Receive tax savings and tax-free withdrawals at maturity or for partial withdrawals.

Also read: How Much Of A Return Does ULIP Guarantee?

ULIPs: Everything You Need To Know About Partial Withdrawals