ULIP vs ELSS : Know about your investment plans and make the RIGHT choice to get your financial Life Goals Done.
Two of the most popular tax saving investment plans are Unit-Linked Insurance Plans (ULIPs) and ELSS which gives you an option to invest monthly.
ULIPs provide you an opportunity to invest in the equity markets while also providing you with life cover. This means you are covered for all contingencies of life.
ELSS, or equity-linked saving schemes, are diversified equity funds that invest in equity markets like ULIP’s. However these are pure investment instruments and don’t offer any life insurance.
The confusion between the two is probably because both make investments in similar asset classes and provide tax benefits on invested amount.
The following points highlight the difference between ULIPs and ELSS:
|Unit Linked Insurance Plans (ULIP)||Equity-linked savings scheme (ELSS)|
|Concept||It combines the characteristics of a market linked instrument and life insurance policy. Premium is invested into chosen funds and life cover is offered by deducting mortality charges||It is a diversified equity mutual fund.|
|Charges||FMC under a ULIP is capped at a maximum of 1.35%||FMC under ElSS a maximum of 2.75%|
|Switching||ULIP’s provide the flexibility to switch between different funds (namely equity & debt) without any charges or tax implication||If a customer wants to switch from an ELSS fund to any other fund, he / she has to exit the existing fund and invest in a new fund which will carry an exit load|
|Switching during Lock in period||ULIP’s offer switching even during the lock in period of 5 years||Under ELSS, if the investor wants to switch the fund, he / she can do so only after the lock in period of 3 years|
|Lock-in Period||ULIPs have a lock-in period of 5 years, and partial withdrawals can be made only after that. (Provided all premiums are paid)||ELSS have a minimum lock-in period of 3 years.|
|Death Benefit||ULIP’s provide a life cover where in case of death, the nominee is paid the higher of Sum Assured or the Fund Value. In some cases depending upon the type of ULIP, both Sum Assured & Fund Value are payable as Death benefit to the nominee||ELSS do not have the insurance component. The invested corpus is entitled to the nominee|
|Tax Benefits#||A ULIP policy also provides the insured person the benefit of tax savings and exemptions!
Under Section 80C of the Income Tax Act, 1961, the premiums paid towards your ULIP allow you deductions of up to Rs. 1, 50,000 against your taxable income.
What’s more is that the maturity benefit under ULIPs are exempt from taxation under Section 10(10D) of the Income Tax Act, 1961.
# Subject to provisions as per Income Tax Act, 1961. Tax Laws are subject to change.
|It qualifies for the tax exemptions under section (u/s) 80C of the Indian Income Tax Act, 1961, where investments up to 1.5 lakh from your total income.|
Bajaj Allianz Life ULIP plans offer the benefits of both life insurance and market-linked returns thus facilitating you to secure your families future and get your life goals done. Know more about Bajaj Allianz Life ULIPs here: https://www.bajajallianzlife.com/ulip/ulip.jsp