In ULIPs, the investment risk in the investment portfolio is borne by the policyholder.

Unit linked insurance plans or ULIPs are ideal for goal-based savings. They offer a dual benefit of investment and insurance in one plan. You can get high returns while also financially securing your loved ones in case of an unfortunate event. Not only are ULIPs a great type of investment but also an ideal tax-saving tool. They help you reduce tax and save money.

What is the meaning of tax^* benefits in ULIPs?

The Government of India levies taxes^* on the income that you earn. Premiums paid towards life insurance products such as ULIPs are eligible for deduction from taxable income under Section 80C of the Income Tax Act, 1961 up to ₹ 1.5 lakh per financial year.

How does tax* benefit in ULIPs work?

Let us take Divya’s example:

Divya invested in a ULIP to save for her daughter’s higher education. The ULIP offers a total sum assured of ₹ 15 lakh for an annual premium of ₹ 1.8 lakh. Let us now evaluate the deduction under Section 80C that Divya can claim on this ULIP premium paid. As per the tax laws, Divya can claim a deduction of premium paid up to 10% of the total sum assured. Hence, Divya can claim a deduction of up to ₹ 1.5 lakh paid as premium towards ULIP from her taxable income and not the entire ₹ 1.8 lakh, provided that she is not claiming any other deduction under Section 80C.

Let us assume another scenario where Divya invested in a ULIP with a total sum assured of ₹ 15 lakh with an annual premium of ₹ 1.5 lakh. In this case, she will be eligible to claim a deduction of an entire premium under Section 80C, provided that she is not claiming any other deduction under Section 80C.

Conclusion

ULIPs can help you grow your money and achieve different financial goals, while also helping you save tax. Our new-age ULIP, ICICI Pru Signature awarded as the Best ULIP policy of the Year 2021¹, helps you do just this. This plan not only helps you achieve your financial goals but also provides you with tax^* benefits. Additionally, it offers you and your family overall financial protection with a life cover^{^}. In this plan, your premium is invested in a fund^~ of your choice – equity, debt or a combination of both. This allows you to grow your wealth as per your risk appetite.

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