IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

How to Save Tax with Your ULIP?

Date 07 Jul 2023
Time 5 mins read
★
3.3
Rated by 124 readers

From the moment we start earning, the joys of our paycheck are chipped away by a tedious, yet incredibly important, part of our financial journey - paying our taxes! When you start planning for your future, you may not account for your tax liability, leading to a gap between what you expect to have saved up, and what you actually end up with. Fortunately, there are plenty of correct ways to reduce the amount of taxes you must pay.

As a current ULIP investor, you've already taken a smart step towards securing your financial future. In addition to maturity benefits, your ULIP also offers you some significant tax benefits*.

Let’s understand these benefits to leverage them in the best way possible. This will not only help you reduce your liability but also enhance your overall savings.

Triple tax benefits*

ULIPs provide not just one, but ✨triple tax benefits*✨ that can help you optimize your tax liabilities:
1. Investment: Under Section 80C of the Indian Income Tax Act, the premium you pay for your ULIP is eligible for tax deduction up to Rs. 1.5 lakhs in a financial year. Your ULIP, therefore, reduces your taxable income and potentially helps you save a significant amount.

2. Withdrawals: After the lock-in period of 5 years, if you choose to withdraw funds from your ULIP, the entire amount is tax-exempted subject to conditions in Section 10(10D)**. This means that you can access your accumulated corpus without any tax implications, thereby meeting your financial needs easily.

3. Returns: The Maturity Benefit you receive at the end of your ULIP tenure is fully exempted from tax under Section 10(10D)** of the Income Tax Act. Additionally, the Death Benefit received by your nominee in case of your unfortunate demise is also exempted from tax under Section 10(10D)** of the Income Tax Act. These tax exemptions ensure that the returns from your ULIP investment are not eroded by taxes, allowing you to enjoy the full maturity proceeds.

By staying invested in your ULIP, you are not only taking a proactive step towards securing your financial future but also paving your way to saving taxes. So, keep your funds invested, reap the tax benefits*, and let your ULIP investment grow steadily.

How much helpful you found this article?
Star
3.3
Rated by 124 readers
3.3 / 5 ( 124 reviews )
Not Helpful
Somewhat Helpful
Helpful
Good
Best
Rating

Thank you for your feedback

Don't forget to share helpful information in your circle

About Author

Author

FAQs

How do ULIPs help in tax saving?
There are plenty of ULIP plans tax benefits, including tax deductions under Section 80C for premiums paid (up to INR 1.5 lakh per annum), tax-free returns under Section 10(10D)**, tax-free fund switches, and exemption from Long-Term Capital Gains (LTCG) tax.
Can I switch between funds in ULIPs without any tax implications?
Yes, ULIPs allow policyholders to switch between different funds without any tax implications. This flexibility enables you to manage your investments according to market fluctuations and your risk appetite.
Can I claim tax deductions for ULIP premiums under Section 80C?
Yes, the premiums paid towards ULIP policies qualify for tax deductions under Section 80C* of the Income Tax Act. You can claim a deduction of up to INR 1.5 lakh per annum on the premiums paid.
Show All
hide
  • Disclaimer

    *Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
    ^Under Section 80C of the Indian Income Tax Act, the premium you pay for your ULIP is eligible for tax deduction up to Rs. 1.5 lakhs in a financial year.
    **Sec 10(10D) benefit is available subject to fulfilment of conditions specified therein. As per Section 10(10D) of the Income-tax Act, 1961, proceeds from Unit Linked Life Insurance policies issued on or after Feb 1, 2021, shall be taxable as income from other sources if the cumulative annual premium payable by taxpayer for such life insurance policies exceeds ₹ 2.5 lakhs.
    Trade Logo "Aditya Birla Capital" displayed above is owned by ADITYA BIRLA MANAGEMENT CORPORATION PRIVATE LIMITED (Trademark Owner) and used by ADITYA BIRLA SUN LIFE INSURANCE COMPANY LIMITED (ABSLI) under the license.
    Aditya Birla Sun Life Insurance is only the name of the Company and do not in any way indicate the quality, future prospects or returns. The name of the funds offered does not in any way indicate their quality, future prospects or returns. In ULIP plans, the investment risk in the investment funds chosen by you is borne by you. Investment funds are subject to investment risks and unit prices may go up or down reflecting the market value of the underlying assets. Past performance is no guarantee of future results. The charges are guaranteed throughout the term of the policy unless specifically mentioned and subject to IRDAI approval. The value of the investment fund reflects the value of the underlying investments. These investments are subject to market risks and change in fundamentals such as tax rates, etc affecting the investment portfolio. The premium paid in unit linked life insurance policies are subject to investment risk associated with capital markets and the unit price of the units may go up or down based on the performance of investment fund and factors influencing the capital market and the policyholder is responsible for his/her decisions.  GST and any other applicable taxes levied as per extant tax laws shall be deducted from the premium or from the allotted units as applicable. Tax benefits are subject to change in the tax laws. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document. The Past performance of the Unit linked fund(s) of the company is not necessarily indicative of the future performance of any of these Unit linked fund(s). Linked Life insurance products are different from the traditional life insurance products and are subject to the risk factors.
    IN THIS POLICY, INVESTMENT RISK IN THE INVESTMENT PORTFOLIO IS BORNE BY THE POLICY HOLDER.
    Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policy holder will not be able to withdraw/surrender the monies invested in Linked Insurance Products completely or partially till the end of the fiſth year from inception. For more details, please refer to your policy contract.
    Aditya Birla Sun Life Insurance Company Limited
    Write to us at
    Customer Service, Aditya Birla Sun Life Insurance Company Limited, G Corp Tech Park, 6th Floor, Kasar Wadavali, Ghodbunder Road, Thane - 400601.
    Registered office
    Aditya Birla Sun Life Insurance Company Limited, One World Centre, Tower 1, 16th Floor, Jupiter Mill Compound, 841, Senapati Bapat Marg, Elphinstone Road, Mumbai - 400 013 | +91 22 6723 9100 | CIN: U99999MH2000PLC128110 | IRDAI Regn. No. 109
    BEWARE OF SPURIOUS / FRAUD PHONE CALLS!
    IRDAI is not involved in activities like selling insurance policies, announcing bonus or investment of premiums. Public receiving such phone calls are requested to lodge a police complaint.
    ADV/7/23-24/902