This Tax Season Invest for Something More Than Just Tax Saving

It’s that time of the year when most of the taxpayers frantically search for tax-saving instruments to save their hard-earned money. However, in a bid to save tax, most of the time, people check only the tax feature of an investment option and forget to check its returns. As a result, the selected investment option may not give good returns in the long-run, and taxpayers might regret their decision of locking their hard-earned money in that option.

But this tax season, it’s time to think about the future and go with an investment option that not only helps in saving tax but also grows the wealth in the long run.

Here, Unit-Linked Insurance Plans (ULIPs) can be considered as a wealth creation tool over the long run, keeping in mind the returns, protection and tax-savings, offered by one product.

1. Milestone-centric Planning

As ULIPs come with a minimum lock-in period of five years, they are an apt investment option for goal-centric planning like child’s education, marriage, home purchase, etc. Further, a policyholder can make partial withdrawals after the lock-in period and thus, use the amount to meet any immediate money requirements.

2. Invest as per your risk appetite

ULIPs allow investing funds in a mix of equity and debt funds in varying proportions.

A young individual with high-risk tolerance can invest more in equities. Or, one can go with the combination of equity, debt and money market investments to enjoy high returns with low risk. Similarly, if they don’t want to take risks, they can invest their money in debt funds.

Combining equity with debt will help in managing the risk profile, depending on the current income, age and other parameters.

3. Flexibility

There is a freedom to switch from one asset class to another or modify the proportion in which money has to be invested in equities and debts. It helps the investor to benefit from market upturns and escape market volatility to enjoy the opportunities of steady wealth appreciation. Usually, four free switches are given per year.

4. Top-up Investment

ULIPs let one invest their surplus cash through periodic top-ups. It means, if the market is performing well, one can invest extra funds in ULIP plan and let it grow.

5. Tax Benefits

In addition to the above benefits, ULIPs also offer fantastic tax savings as stated below:

  • Death benefit paid to policyholder: Any amount received by the nominee upon the death of the policyholder is tax-free.
  • Maturity amount paid: At the time of maturity, a policyholder gets the assured benefit or the fund value, whichever is higher. This payout is tax-exempted under Section 10(10D).
  • Top-up: A surplus investment made under ULIPs may be eligible for tax deduction under Section 80C as well as it enjoys an exemption under Section 10(10D).
  • Partial withdrawals: If the amount is less than 20% of the fund value of the policy, it is tax-free, provided withdrawal is made after the lock-in period.
ULIPs enjoy Exempt, Exempt, Exempt (EEE) Tax Status
Premium Tax-Free
Income earned Tax-Free
Maturity Amount Tax-Free


In an ideal situation, separate investments in term insurance and mutual funds would help an investor enjoy good returns, assured protection and tax savings. Unfortunately, sometimes, it is hard to strike the perfect balance between different investment products.

This is why, investing in a product like ULIP is an easy way to enjoy the triple benefits that are life cover, high returns and tax saving with minimum risk.

ULIPs can be a viable wealth creation tool for the long-term because of the diversification of funds offered. They are suitable for those who want to start young to ride on the equity benefit. So, this tax season, don’t just look for the tax benefit, in fact, think beyond and go with the instrument that helps you achieve your long-term goals.