ULIP (unit-linked insurance plan) is the best insurance and investment package that guarantees life with both investment and life components. The tax-saving options that can be adopted at any time during the maturity and policy term are one of the best features of the ULIP plan.
Due to the flexibility, more people often prefer the ULIP plan over other investment options. It is considered a trusted method to achieve long-term wealth goals. Read the article on tax benefits that are combined with the ULIP plan.
6 ULIP tax benefits
Due to short lock-in periods and greater returns, ULIP plans are considered appealing tax-saving instruments. Let us look at the 5 tax benefits offered by the ULIP plan.
- Single plan with multiple benefits
A ULIP plan outperforms mutual funds, traditional insurance plans, and PPFs. A life insurance policy only secures you in the case of death, but it does nothing to build your wealth.
But the ULIP plan is one of the best insurance plans that acts like a bridge and offers many tax benefits.
- Deduction for additional expenses
The ULIP plan provides the top-ups that are used to increase your investment. You can also use these top-ups to become eligible for income tax deductions under sections 10D and 80C.
- A long-term savings plans
The ULIP tax benefit plan is available for long-term investments. You can gain tax incentives for at least 5 years. It means you do not need to pay premiums during the lock-in period of your ULIP plan.
If you can retain this plan for a long time, then it will bring more tax benefits for you.
- Partial withdrawals
Partial withdrawals are tax-free according to the ULIP plan. Even after the lock-in period of 5 years, you do not need to pay any tax on its withdrawals. The only thing you need to be cautious of is exceeding your withdrawal amount by more than 20% of the total amount of money.
- Withdrawal is free from tax in case of death
In the case of the unexpected death of the policyholder, the family of the policyholder is entitled to the sum insured amount along with the profits offered by the ULIP plan. The payments made under the ULIP plan are free from income tax under the standards.
- Maturity ulip tax benefits
A ULIP is usually considered a market-linked investment plan that provides you with tax-free maturity benefits under the income tax. If you want to be eligible to get tax-free maturity benefits, the premium should be less than 10% of the total insured if the plan is acquired after a specific time.
