New-age ULIPs facilitate more efficient tax planning

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ULIP Plan Comparison
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New-age ULIPs facilitate more efficient tax
planning
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• India is one of the highest saving nations
  amongst the emerging economies. The Gross
  Domestic Saving constitutes savings of public,
  private corporate and household sectors with the
  household sector having a dominant position over
  other institutional sectors. It is thus
  imperative that the government makes efforts to
  boost savings by giving tax deductions. Though
  there are multiple modes for saving tax, life
  insurance is one of the most effective tax-
  planning instruments.
• Upon investing in Life Insurance products, one
  can get a tax deduction on the premiums paid
  under Section 80 C of the income tax act, 1956
  (within an overall limit of Rs. 1.50 lacs per
  year).Also, the maturity proceeds of a Life
  Insurance policy are fully exempt if the premium
  paid on such policy did not exceed 10 of the sum
  assured in any of the year.

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• Amongst all insurance plans, new age Unit Linked
  Insurance Plans (ULIPs)are a category of
  goal-based financial solutions that offer dual
  benefits of protection and Investment offering
  the advantage of tax saving to the customer. A
  Unit linked Insurance Plan (ULIP plan comparison
  )is linked to the markets and offers the
  flexibility to invest the units in equity or debt
  funds depending upon the customers risk
  appetite. The investment risk is borne by the
  policy holder. In this respect, a new age ULIP
  acts somewhat like a mutual fund with added
  benefit of life cover and it offers more
  efficient tax saving by charging much lesser than
  mutual funds.

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ULIPs now have charges capped and offer better
returns

• In the past, ULIPs suffered from certain
  limitations like high charges, sale keeping in
  mind a short term horizon, and lack of active
  involvement by the customer. In 2010, the IRDA
  issued new guidelines for ULIPs in order to
  improve the returns for investors by reducing
  charges and to ensure that the new product is
  sold and bought as a long-term protection and
  savings .

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Efficient tax saving using low charge ULIPs
ULIPs offer comprehensive tax benefits. The
premium paid up to Rs 100,000 in a year is
eligible for tax benefit under section 80C. The
maturity benefit for policies with insurance
cover with 10 times of the premium or more is tax
free under section 10(10D). Moreover, the returns
under various types of funds including debt funds
are also tax free. Partial withdrawals made at
various points in time are also tax free.The
above tax benefits along with lower charges offer
a win-win situation for the customer.
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Conclusion

• Tax planning should not be done in isolation and
  one must align this activity with the larger
  investment needs in a well planned and systematic
  manner to gain maximum benefits. The habit of
  financial planning should be cultivated right
  from the early stages of career. Ideally this
  exercise should be done at the start of every
  financial year where one should make an
  assessment of allocation of available funds to
  ULIP- long-term tax-saving instruments.
• Source http//blog.hdfclife.com/tax-planning-by-u
  lips-532590

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