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Know Everything About Tax Saving With ULIP

Jatin worked in MultiNational Corporate where he had to travel a lot for his job purpose; Jatin was an educated man and was aware of the unit-linked insurance plan meaning he purchased a ULIP plan for his family to be secure even if Jatin was not there for them. While travelling during the job, His Car was involved in an accident, and he died. 

According to IRDA regulations, the insurer has 15 days to seek clarifications and 30 days to settle a claim after receiving all papers. While the family deals with losing a loved one, they do not have to worry about the lump-sum payment or instalment payment limiting their life goals. 

What is ULIP?

A unit-linked insurance plan or ULIP is an investment vehicle in which the policyholder also receives life insurance as part of the investment policy. Tax advantages are ULIP’s distinguishing feature. These tax advantages are available throughout the term as well as at maturity. The flexibility of ULIPs is one of the reasons why they are becoming more popular than other investment options. With the same 5-year lock-in duration, it outperforms tax-saving fixed deposits, NSCs, and post office deposits. The best part is that not only may you deduct your ulip plan subscription payments, but your maturity benefit is also tax-free. 

How does ULIP work?

  • When a person buys a ulip plan, they must pay a certain premium for the quantity of coverage they want.
  • While a portion of the money is utilized to provide insurance coverage, the remainder is invested in equity or debt.
  • For their investing strategy, investors have the choice of choosing between stock, debt, or a balanced portfolio.
  • They also have the option of switching between investment plans during the premium payment process.
  • Fund managers invest in debt or equity securities and manage their investments according to the fund type.
  • It’s worth noting that, according to the IRDAI, ULIPs have a 5-year lock-in period, and their performance or ability to create profits is tied to the markets.


How to save tax with ULIP?

Unit-linked insurance plans (ulip) might be an intelligent alternative for investors because they offer a variety of tax advantages. The following are some of the benefits on tax-saving ulip:

Partial withdrawals are tax-free 

If you remove money from your ULIP plan after the five-year lock-in period, you won’t have to pay taxes on that withdrawal as well, as long as the amount is less than or equal to 20% of the fund’s value. In addition, life insurers may impose other restrictions, such as a minimum withdrawal amount or a maximum number of partial withdrawals each year. As a result, policyholders must read the best ulip plans policy document to learn more about these terms and conditions while making timely monthly payments.

Top-ups Save You Money

A top-up premium can be paid at any time during the policy term as long as the total number of top-up premiums does not exceed a certain percentage of your unlimited premium. In their policy guidelines, all businesses specify the minimum amount for top-ups. A top-up bonus is a money that a policyholder can put into their ULIP in addition to their regular compensation. 

Withdrawals are not subject to taxation.

For quite some time, the tax advantages of ULIPs have been well-defined. However, the advantages of investing in this instrument do not end there. Unit-linked products allow investors to save money on taxes on their withdrawals. While mutual fund income is taxed, an investor can protect their money by purchasing ulip

In the event of death, the settlement is tax-free

In the unfortunate case of the policyholder’s death, the policyholder’s nominees are entitled to the entire sum promised, or the total value of the fund in which the policyholder had invested, whichever is greater, according to the policy terms and conditions. While the family deals with losing a loved one, they do not have to worry about the lump-sum payment or instalment payment limiting their life goals. In addition, except for a Keyman Policy, the entire payout is tax-free in the event of the policyholder’s death.

Long-Term Financial Objectives

It’s possible to correlate tax-saving ulip with short-term insurance while learning about the lock-in period. This is not the case; rather, it implies that an investor’s financial goals are long-term. The net returns from this method are usually higher because the money is compounded. 

Maturity Tax Benefits

According to Section 10 (10D) of the Income Tax Act of 1961, ulip provides a tax-free maturity sum. The only stipulation is that for plans acquired after April 1, 2012, the annual premium must be less than 10% of the sum assured. 


ULIP is divided into several kinds, ranging from equity to debt. The Insurance Regulatory and Development Authority of India (IRDAI) made the necessary adjustments to ulip plan lock-in periods. The IRDAI expanded the ULIP lock-in term from three to five years. However, in order to reap the benefits of the policy, one must invest for the long term, which might range from 10 to 15 years. Ulips can also aid in the accumulation of a retirement fund. Ulips are also a fantastic investment decision for your current financial circumstances due to their tax-saving ulip.

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