You work hard to earn well so that you can give your family a life of happiness and security. Along with that, you also plan and look for alternative sources to supplement your income, so that you are also able to realize your other dreams and goals in life.
However, in the process of doing so, taxes often stand as an impediment that eat away your hard-earned income; thus, slowing your progress towards fulfillment of your life goals.
Since tax liability cannot be foregone completely if you fall in the tax bracket, majority of you seek a way out to get some respite from it. While there are several investment instruments that offer tax benefits, one of the best is the ULIP plan.
Wondering what exactly is ULIP and what are ULIP tax benefits? Let us guide you about it all.
What is ULIP?
Unit Linked Insurance Plan (ULIP) refers to a two-in-one insurance cum investment plan. This plan is a great instrument to enjoy the dual benefits of securing your family as well as realizing your goals and dreams. Under this plan, a part of your premium towards the insurance cover gets invested in different investment funds.
This twin-benefit instrument also provides you with the flexibility to shift your funds from one source to another, if you feel you are not earning good returns. This means that you can maximize your earnings by remaining up to date about market fluctuations.
There is also a lock-in period in this plan, meaning that you can only make withdrawals after this period is over. However, only partial withdrawals are allowed.
How Does ULIP Help in Tax Saving?
The ULIP is one of the best tax-saving instruments that offer you holistic benefits. As per different Sections of the Income Tax Act, you get tax-saving benefits on both the premiums that you pay as well as the maturity benefits that you receive.
• Benefits Under Section 80C
Under section 80C of the Income Tax Act, you will receive tax benefits on your annual premium payments. The amount shall be considered as a deduction up to the limit of Rs. 1.5 lakhs, meaning your taxable income will get reduced by the premium payments up to a maximum of this specified limit.
For instance, if you have a ULIP plan, where your annual premium towards the same equals Rs.2.15 lakhs, then your premium payment up to Rs. 1.5 lakhs shall be considered as a deduction from your taxable income. This will bring down your liability by Rs. 1.5 lakhs. However, if your annual premium is only, say Rs. 60 Thousand, then in that case, you will be deducted Rs. 60 Thousand from your taxable income.
• Benefits Under Section 80 CCC
To encourage investors to invest money in the National Pension Scheme, the government also offers additional tax benefits if you also have this plan along with ULIP. You get an extra tax deduction benefit up of up to Rs.50,000. This means that overall you can avail tax benefits of up to Rs. 2 lakhs.
• Benefits Under Section 10(10D)
Along with getting tax benefits on your annual premium payments, you also get benefits on the maturity benefit or death benefit that you or your loved ones will receive. As per this section, the entire payout you will receive will be full tax-free as per Section 10(10D). This means you will receive your entire amount without taxes reducing your benefit by even a bit.
Get Maximum Tax Benefits
All the ULIP tax benefits together make it a smart investment for your portfolio. ULIP plans as offered by reputable insurers Max Life Insurance provide you with five funds option to choose from along with unlimited switch options, meaning you can earn returns according to your preference, along with gaining all the tax benefits.
To get maximum benefits, research thoroughly to buy the best ULIP plan offered. So, make a smart choice with purchasing the best ULIP plan to reduce your tax liability the right way.