DON’T Buy ULIP To Save Tax
The financial goals of an individual can be achieved
through ULIP (Unit-linked Insurance Plan). However, high cost, complexity in
policy and low transparency makes it a difficult choice for the common man.
Some of the key points about ULIP are:
• Investment in ULIP saves tax u/s 80 C up to ` 1, 00,000. This limit will be reduced to ` 50,000 after the implementation of the Direct Tax
Code (DTC). The minimum sum assured has been increased from 5 times of annual
premium to 20 times to be eligible for deduction in proposed DTC.
• ULIP gives insurance cover along
with investment in equities. If you need a high value
insurance cover, term insurance is better as its cost
has come down in the past. Also, buying
it online makes it cheaper.
• Daily NAV is declared as per IRDA rules and your investment is
controlled by experienced
professionals.
• ULIP makes you invest regularly and for long term, just like SIP
in mutual funds. Thus,
the chance of loss due to market fluctuations is
reduced. The minimum lock-in period has
been raised from 3 years to 5 years. Premature withdrawals
will become taxable after the
DTC implementation.
• There are a number of ULIP plans with multiple features offered
by insurance companies.
The best ULIPs are those which give fund value plus
risk cover in case of death.
• AVOID ULIP: If you do not want insurance cover or are already
sufficiently insured,
ELSS is a good option.
• If you do not want to take high risk of share market and are
happy with return around 8%,
PPF scores over it. ULIPs are more beneficial if
invested for long term, at least for 10 years. There is no limit for minimum or
maximum investment like PPF limit of ` 70,000
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