ULIP (Unit Linked Insurance Plan) is a popular insurance product since it offers the opportunity for wealth creation in addition to providing life cover. But can you avail of tax benefits with your ULIP investment? Read further to explore ULIP and how it can help you save tax.
Investing in life insurance is a must to ensure sufficient financial backup in case of life-threatening contingencies such as a serious illness or accidents and even demise of the insured life. The utility of the policy is enhanced even more if it also allows you to invest in the stock market to accumulate wealth in the long run. This is exactly what has made ULIP a popular choice among investors.
A ULIP invests a portion of the investor’s money for securing his/her life while investing the remaining portion in the below funds, depending upon the preferences of the investor:
All the major banks, insurance firms, and other financial institutions offer unit-linked insurance plans. You can also consider HDFC Life ULIP plansthat offer a wide range of funds for investment with unlimited free switching options.
Does ULIP Offers Tax Benefits?
Yes, you can invest in ULIP while enjoying tax benefits (under the income tax act 1961) as below:
If you want to invest an additional sum in your ULIP, then you can do so by purchasing top-ups. These can also be claimed for deductions under sections 80C and 10D.
Multiple Benefits Under a Single Plan
A traditional life insurance plan provides you only with life cover. On the other hand, plans such as mutual funds, PPFs, and other deposits offer wealth creation in the long run but no life cover. A ULIP combines the benefits of both insurance plans and savings plans while also giving you tax benefits.